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  • FIRST POST
    • ejfW9
    • By ejfW9 15th Apr 18, 12:34 PM
    • 1Posts
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    ejfW9
    Ex gratia payment advice
    • #1
    • 15th Apr 18, 12:34 PM
    Ex gratia payment advice 15th Apr 18 at 12:34 PM
    Looking to see if anyone has thoughts on the below...

    I have recently resigned from my job with a one month contractual notice period. My employer is offering me a lump sum payment if I work an extra month (so two months in total)... does anybody know if this could be considered as an ex-gratia payment and therefore be paid tax free (it is less than 30k), or can ex-gratia payments only be made in redundancy/termination situations?

    Many thanks in advance!
Page 1
    • antrobus
    • By antrobus 15th Apr 18, 12:44 PM
    • 16,014 Posts
    • 22,843 Thanks
    antrobus
    • #2
    • 15th Apr 18, 12:44 PM
    • #2
    • 15th Apr 18, 12:44 PM
    Looking to see if anyone has thoughts on the below...

    I have recently resigned from my job with a one month contractual notice period. My employer is offering me a lump sum payment if I work an extra month (so two months in total)... does anybody know if this could be considered as an ex-gratia payment and therefore be paid tax free (it is less than 30k), or can ex-gratia payments only be made in redundancy/termination situations?

    Many thanks in advance!
    Originally posted by ejfW9
    An ex-gratia payment is simply a payment made where there is no contractual obligation to do so.

    You should ask your employer whether or not PAYE will be applied. I'd guess that the answer would be yes.
    • jimmo
    • By jimmo 15th Apr 18, 11:02 PM
    • 1,973 Posts
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    jimmo
    • #3
    • 15th Apr 18, 11:02 PM
    • #3
    • 15th Apr 18, 11:02 PM
    You are in a termination situation. The fact that you decided to terminate your employment makes no difference to the tax position.
    https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim12805

    If you work the extra month will you be paid your regular salary for that month and get a lump sum on top of that?
    At the moment I would say that it is arguable whether the lump sum will be a reward for work done (taxable in full) or compensation to you for giving up your lawful right to terminate your employment with one month notice (taxable as a termination payment so the first 30,000 exempt).
    If you are going to get your normal salary for that month I would think that you are more than half way to having the lump sum regarded as compensation but it would be wise to get your employers offer in writing specifying that the lump sum is compensation for ceding your legal right to give one months notice.
    • getmore4less
    • By getmore4less 16th Apr 18, 9:24 AM
    • 33,048 Posts
    • 19,924 Thanks
    getmore4less
    • #4
    • 16th Apr 18, 9:24 AM
    • #4
    • 16th Apr 18, 9:24 AM
    I think the company is offering a new contract(on expiry of the old one) for 1 month on twice the rate of the current one.

    Or modifying the existing contract for the final month and the notice being modified to 2months

    Throwing away the resignations and producing a settlement agreement might work.
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