Corporation Tax Act 2009 section 77

Payments in respect of employment wholly in employer's trade

Section 77 sets out the rules governing when an employer can claim a tax deduction for redundancy payments and approved contractual payments made to employees whose employment was wholly in the employer's trade.

• A deduction is allowed for redundancy and approved contractual payments where the employee's employment was wholly in the employer's trade, but only where no deduction would otherwise be available under normal accounting principles
• For approved contractual payments, the deduction is capped at the amount that would have been due if a statutory redundancy payment had been payable instead
• The deduction is claimed in the accounting period in which the payment is actually made, or if the trade has permanently ceased, the payment is treated as made on the last day the trade was carried on
• Where a trade is carried on in partnership and there is a change in the partners, the cessation rule does not apply provided at least one company that was in the partnership before the change continues to carry on the trade in partnership after the change