Income Tax (Trading and Other Income) Act 2005

77 Payments in respect of employment wholly in employer’s trade

(1) This section applies if—

(a) the payment is in respect of the employee’s employment wholly in the employer’s trade, and

(b) no deduction would otherwise be allowable for the payment.

(2) In calculating the profits of the trade, a deduction is allowed under this section for the payment.

(3) The deduction under this section for an approved contractual payment must not exceed the amount which would have been due to the employee if a redundancy payment had been payable.

(4) If the payment is made after the employer has permanently ceased to carry on the trade, it is treated as made on the last day on which the employer carried on the trade.

(5) If there is a change in the persons carrying on the trade, subsection (4) does not apply so long as a person carrying on the trade immediately before the change continues to carry it on after the change.

(6) The deduction under this section is allowed for the period of account in which the payment is made (or treated under subsection (4) as made).