TAXATION OF PAYMENTS MADE ON JOB TERMINATIONThe question of the tax treatment of severance payments made to departing employees has been the source of debate in recent months.

Practitioners will, therefore, welcome the Inland Revenue's statement of practice which clarifies the circumstances in which tax will not be charged under s.313 of the Income & Corporation Taxes Act 1988.S.313 imposes a charge under sched E on the full amounts of payments made to individuals for undertakings (given in connection with an employment) which restrict their conduct or activities.

One example of a payment where a s.313 charge could arise is where an individual leaving a job receives money from the employer for undertaking not to work for a competitor.

There has been concern about the possible application of s.313 to termination agreements under which the employee accepts that the agreement is 'in full and final settlement' of his or her outstanding claims against the employer.

The employee accepts that the sums payable satisfy claims and legal rights to which contract or statute may entitle them.

The Revenue has confirmed that, where money is paid in settlement of financial claims relating to the employment which the employee could have pursued in law, such an undertaking will be accepted as having no value under s.313 and a charge will not arise.

However, it may arise where an agreement contains specific provisions as to the employee's conduct or activities which involve an undertaking going beyond the settlement of existing claims and rights against the employer.

It will also be necessary to consider s.19 of the Act, where the payments are emoluments of the employment or s.148.

Payments chargeable under s.148 are exempt from tax on the first £30,000.

The new statement of practice does not affect the treatment of payments within s.148.ACAS ANNUAL REPORTThe recently published ACAS annual report for 1995 provides a concise view of developments and trends in employment law.

Last year ACAS received 91,568 cases regarding individual employment rights; an increase of 15% on the 1994 total, which was the previous reco rd.

Unfair dismissal claims still form the largest part of the caseload, but claims under the Wages Act and in respect of breach of contract are catching up.

Sex discrimination cases rose by 9% and the settlement rate increased from 33% to 40%, but the number of race discrimination claims fell by 5%.

ACAS's nationwide public enquiry point service dealt with a record number of queries of over half a million, reflecting the importance and widespread interest in employment issues.

The government's decision to make ACAS conciliation available in redundancy payment cases and to offer independent binding arbitration as a voluntary alternative to an industrial tribunal hearing is likely to have a significant impact on the workload of ACAS in future.