Compromise Agreements

Poppie68

Does anyone know if tax and NI is payable on a payment made under a Compromise Agreement.

Thanks

noh

It's a payment of compensation for loss of office. There should not be any tax and NI payable on amounts up to £30000.
There will be tax an any part of the payment which is a contractual obligation such as payment in lieu of notice.

Poppie68

noh wrote: »

It's a payment of compensation for loss of office. There should not be any tax and NI payable on amounts up to £30000.
There will be tax an any part of the payment which is a contractual obligation such as payment in lieu of notice.

Thankyou, looks like ive been had by my ex employer and will have to go down the route of claiming back from HMRC. Im also going to be having words with the solicitor that looked over the agreement before it was signed.

mee_2

There are usually 2 parts to the compromise agreement -- pay in lieu of notice, which is subject to PAYE and NI and an ex-gratia payment which is not (up to £30k).

lulu650

Employers word the CAs to lessen scrutiny from the tax office. Pay in lieu should be taxed, however, this is usually included in any ex gratia payment and called termination for loss of office.

Every CA would have a clause to state that if income tax needed to be paid, then it would be the employee who would need to pay it. I know of one company, after contact from the tax office, who separate out pay in lieu in the CA and show it to be taxed within the CA .

You haven't been had by the employer and your solicitor should have explained this to you sufficiently before signing the paperwork.