Compromise Agreement Tax
Compromise Agreements are recognised by statute, and therefore whether you pay tax depends upon the nature of the sums payable under the agreement.
The general principle is that the first £30,000 of a compromise agreement payment will typically be tax free. Redundancy and ex-gratia payments will be tax free.
A common area of confusion when considering tax under a compromise agreement relates to the treatment of a payment in lieu of notice (PILON) clause. If the payment is contractual, tax will be payable in the normal way as strictly speaking the payment is a continuation of a contractual term. By contrast if there is no contractual right to the payment in lieu of notice then it will be exempt from tax, subject to the £30,000 limit.
More about Compromise Agreements...
- What is a compromise agreement?
- Usual terms of a compromise agreement
- Compromise Agreement: How much should I get?
- Is the compromise agreement compensation negotiable?
- Compromise Agreement: How much will it cost me?
- Redundancy Compromise Agreements
- Compromise Agreement Tax
- Compromise Agreement Signing Urgently by a Solicitor