Tax implications of a Settlement Agreement

Undervalued

helptips said:

Hey @Undervalued and @68ComebackSpecial.  Soz for not replying sooner.  Been unwell with cough, cold and shivers for the last few days.  I thought it was covid, but thankfully it must have just been a nasty flu bug.

Cheers guys for the top advise.  I agree that it's not straight forward and should consult an accountant.  But here's a problem.  Solicitor says they only do legal advice and don't do any tax advice nor can they recommend anyone.

I contact a couple of accountants, but most don't know anything about settlement agreements.  Then I called another solicitor's firm.  They said they can do both legal and tax advice, but I'd need to move my case over to them.  I can't do that because it's being paid by my union and they won't allow it.  I'm stuck.

I don't mind paying, but does anyone know who can do calculations relating to settlement agreements?

Cheers

Can you then not go back to the union? Given the large amount of money involved fully understanding the tax implications is surely key to making a decision about whether to accept the agreement or not?

That said, what are your other options? If this worked out in the worst possible way tax wise would you still accept the agreement? If the answer to that is yes then presumably you do so, let the employer deduct whatever tax they consider is due then take professional advice and reclaim any overpayment from HMRC.

Is this union funded solicitor just doing the absolute minimum legally required for a settlement agreement to be binding? Basically just check it is correctly worded and remind you that if you sign you lose almost all rights to make any further claim. Or, are they actively negotiating on your behalf? If the latter then they should research the tax position for you as it is pretty fundamental to agreeing the deal.

helptips

Undervalued said:

helptips said:

Hey @Undervalued and @68ComebackSpecial.  Soz for not replying sooner.  Been unwell with cough, cold and shivers for the last few days.  I thought it was covid, but thankfully it must have just been a nasty flu bug.

Cheers guys for the top advise.  I agree that it's not straight forward and should consult an accountant.  But here's a problem.  Solicitor says they only do legal advice and don't do any tax advice nor can they recommend anyone.

I contact a couple of accountants, but most don't know anything about settlement agreements.  Then I called another solicitor's firm.  They said they can do both legal and tax advice, but I'd need to move my case over to them.  I can't do that because it's being paid by my union and they won't allow it.  I'm stuck.

I don't mind paying, but does anyone know who can do calculations relating to settlement agreements?

Cheers

Can you then not go back to the union? Given the large amount of money involved fully understanding the tax implications is surely key to making a decision about whether to accept the agreement or not?

That said, what are your other options? If this worked out in the worst possible way tax wise would you still accept the agreement? If the answer to that is yes then presumably you do so, let the employer deduct whatever tax they consider is due then take professional advice and reclaim any overpayment from HMRC.

Is this union funded solicitor just doing the absolute minimum legally required for a settlement agreement to be binding? Basically just check it is correctly worded and remind you that if you sign you lose almost all rights to make any further claim. Or, are they actively negotiating on your behalf? If the latter then they should research the tax position for you as it is pretty fundamental to agreeing the deal.

Only way to contact union is via email (they blame COVID-19) and I've done that last week without any reply.  I sent them a follow-up again yesterday, but I don't expect a prompt reply.  What a load of mess.  I just wish I could pay someone to check the tax implications.  I would not accept the agreement if I'm making a loss.   This union solicitor is actively negotiating on my behalf, but they have made it clear that tax is one part they don't deal with.

Undervalued

helptips said:

Undervalued said:

helptips said:

Hey @Undervalued and @68ComebackSpecial.  Soz for not replying sooner.  Been unwell with cough, cold and shivers for the last few days.  I thought it was covid, but thankfully it must have just been a nasty flu bug.

Cheers guys for the top advise.  I agree that it's not straight forward and should consult an accountant.  But here's a problem.  Solicitor says they only do legal advice and don't do any tax advice nor can they recommend anyone.

I contact a couple of accountants, but most don't know anything about settlement agreements.  Then I called another solicitor's firm.  They said they can do both legal and tax advice, but I'd need to move my case over to them.  I can't do that because it's being paid by my union and they won't allow it.  I'm stuck.

I don't mind paying, but does anyone know who can do calculations relating to settlement agreements?

Cheers

Can you then not go back to the union? Given the large amount of money involved fully understanding the tax implications is surely key to making a decision about whether to accept the agreement or not?

That said, what are your other options? If this worked out in the worst possible way tax wise would you still accept the agreement? If the answer to that is yes then presumably you do so, let the employer deduct whatever tax they consider is due then take professional advice and reclaim any overpayment from HMRC.

Is this union funded solicitor just doing the absolute minimum legally required for a settlement agreement to be binding? Basically just check it is correctly worded and remind you that if you sign you lose almost all rights to make any further claim. Or, are they actively negotiating on your behalf? If the latter then they should research the tax position for you as it is pretty fundamental to agreeing the deal.

Only way to contact union is via email (they blame COVID-19) and I've done that last week without any reply.  I sent them a follow-up again yesterday, but I don't expect a prompt reply.  What a load of mess.  I just wish I could pay someone to check the tax implications.  I would not accept the agreement if I'm making a loss.   This union solicitor is actively negotiating on my behalf, but they have made it clear that tax is one part they don't deal with.

I would try and contact a tax specialist, either other accountancy firms or a registered independent financial advisor. I cannot believe that one of the big accountancy firms cannot come up with somebody qualified to advise. OK, it will cost but given the amount of money involved....

As I said earlier, my layman's understanding is that the first £30K is tax free providing there was no contractual entitlement to the money so it is, in effect, compensation. The remainder will be taxable but I am not expert enough to know at what rate(s).