Is there a chance I could pay tax on compromise agreement pay out?

Question

I have been offered compromise agreement instead of redundancy and have been told it's tax free, but someone has told me there could be a chance I might have to pay tax somewhere down the line?

Answer 1

So long as it is stated that your job is terminated due to Redundancy, the first £30,000 should be Tax Free.

If you have any doubts, I suggest you ask the Company to add wording to the Compromise Agreement along the lines of 'Any Tax liability that arrises as a consequence of this Agreemnet will be met by the Company'

NB> you will still have to pay tax on any 'money in-lieu' for untaken Holiday & Notice period.

Answer 2

The straight answer is yes, it could be taxed dependent on how it is made up. You will need to consider whether any contractual entitlements have crystallised in order to see whether there are any tax charges. The HMRC website has a full section on compromise agreements as they have been around for many years. This will give you guidance or phone them direct to clarify your individual offer.

Answer 3

Need much more info.