loss if license & HMRC

[explorer61]

Does anyone have any information on this. I have recently been told that HMRC are planning to tax pilots on their loss of license payments. This would be applied to the lump sum that some pilots receive if the worst happens, and may even be backdated! I have spoken to an accountant, and he thinks that they would struggle to backdate it, but I see this as a step too far by HMRC.

[Mr Good Cat]

Do they tax car insurance, or critical illness policies?

What's the logic?

[macdo]

It appears to be true.
here's a starter
Tax Status Of ATC Loss of Licence Payment - MoneySavingExpert.com Forums (http://forums.moneysavingexpert.com/showthread.php?t=5180427)
I think this issue has been touched on here before.

[explorer61]

From what I have gathered so far, possibly the most important factor is where the payment is sourced. If it comes from an insurance company (even via the employer), then it's taxable. If it's the employer who pays it directly, it seems to be tax free. I got mine several years ago, so I'm hoping that they can't backdate it. And I've now spent it!

[Avenger]

We have "loss of licence" which pays a fixed amount assuming you can never fly again, i.e had your legs chopped off.. this amount appears to be tax free as the policy is paid for by the employee, deducted at source from the wages, on the other hand, we also have " income protection" which covers the monthly fixed salary until you get your medical privileges restored ( limited to 2 years) .This income is taxed as it is a benefit provided by the company for the employee .. It seems reasonable in terms of the tax regime. The term " loss of licence " seems to be freely applied to all scenarios, perhaps not quite correctly in some cases.