Finance Bill — Clause 5 — Taxation of Termination Payments In Cases of Psychiatric Injury and Injured Feelings — 11 Oct 2017 at 15:36

The majority of MPs voted to exempt payments made on termination of employment in connection with psychiatric injury and injured feelings from taxation as employment income.

MPs were considering the Finance Bill^[1].

The amendment rejected in this vote was:

• Amendment 4, in clause 5, page 14, leave out lines 27 and 28 and insert—
• ‘(2) “Injury” in subsection (1) includes—
• (a) psychiatric injury, and
• (b) injured feelings.””

The element of the Bill which would have been impacted by the rejected amendment sought to amend provisions relating to the taxation of payments relating to the termination of employment in the Income Tax (Earnings and Pensions) Act 2003 and stated:

• In section 406 (exception in cases of death, injury or disability)—
• (a) the existing text becomes subsection (1), and
• (b)after that subsection insert—
• (2)Although “injury” in subsection (1) includes psychiatric injury, it does not include injured feelings.”

The text sets out circumstances in which payments over a threshold of £30,000 would be treated as employment income and subject to national insurance.

The rejected amendment was accompanied by the following explanatory note:

• This amendment explicitly includes (rather than excludes) injured feelings within the definition of “injury” for the purposes of payments which are excluded from the provisions of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (payments and benefits on termination of employment).

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• [1] Parliament's webpage on the Finance Bill 2017-19

Debate in Parliament |