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    anyone hot on employment law ??? compromise agreement.

    nice quick one here.


    compromise agreement....payment by cheque.....do my employer have the right to deduct tax from the agreed amount ?? its less than 30k....but more than 3K

    4 Comments

    The compromise agreement will state the full breakdown of the
    payments you are receiving and the extent to which the sums will be
    paid free of tax. Usually, up to £30,000 compensation can be paid
    without deduction, but you will have to give tax indemnity to your
    employer within the agreement. This is entirely usual.

    Original Poster

    thanks

    Here is some info which may come in handy

    The agreement should identify and list the various payments being made (such as compensation for loss of employment, payment in lieu of notice, statutory redundancy pay, sums for acceptance of restrictions, etc). The list will serve as a check that you have covered all possible payments and as a prompt to consider the likely tax treatment of each payment.

    As to tax treatment, it is always important to identify the reason for the termination of employment as this affects the tax treatment of the termination payments. In particular, special rules may apply which affect whether a termination payment is capable of attracting an exemption from income tax.

    If the agreement states that a particular payment will be made "free of tax up to £30,000" and it is, but subsequently the Revenue seeks tax on that payment, then the employer will be unlikely to be able to rely on any indemnity in the compromise agreement that requires the employee to meet any tax liability which may arise (which is why certain employers may prefer to deduct tax and require you to claim same at yr end)

    It is worth taking advice on whether the particular circumstances give rise to a deduction - cost may put some people off but the potential savings will more than make up for the cost

    Most companies pay up to £200 for you to get legal advice before you sign it, i didn't need it but had to go they will be able to put it all in plain english.
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