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Lynieloo

Disability discrimination & compensation

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Hello all,

 

Can anyone offer any guidance in the following circumstances; what if an employer agrees to make a payout of compensation for injury to feelings but will not process the payment tax free?

 

Thanks in advance

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How much is it for? If its ex gratia and isn't encompassing wages, holiday or notice pay, it's tax free up to £30k.

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How much is it for? If its ex gratia and isn't encompassing wages, holiday or notice pay, it's tax free up to £30k.

 

Thanks for your prompt response becky.

 

It is over the £30k tax free allowance, however there is a sum of £10k that is purely compensation for the discrimination & injury to feelings, therefore this amount should be free of tax also?

 

Thanks

 

Loo

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Well it needs to be broken down and separated into taxable and non taxable payments - and yes, the injury to feelings is capable of being paid tax free.

 

If they insist on incorrectly taxing the payment, it can be claimed back from HMRC.

 

Is it being paid under a compromise agreement/COT3?

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Well it needs to be broken down and separated into taxable and non taxable payments - and yes, the injury to feelings is capable of being paid tax free.

 

If they insist on incorrectly taxing the payment, it can be claimed back from HMRC.

 

 

Is it being paid under a compromise agreement/COT3?

 

They understand what amounts equal what & they are still not prepared to process it tax free, they have advised if I want it tax free, I can deal direct with HMRC (which I cannot do).

 

Are you aware how simple (lol) the process is or what details the HMRC require if I must claim the tax back, is it quite normal to claim the tax back?

 

It is a compromise agreement Becky, pretty standard. Surely though, because I have now signed I cannot discuss the detail with anyone including HMRC as per the CA?

 

Regards

 

L

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Have a look again at the provisions of the agreement - usually there's a confidentiality exceptions clause, so you can divulge information to "relevant authorities", HMRC, immediate family, for tax purposes or as required by law. HMRC are almost certainly entitled to have knowledge of the payment and how it was made - logically therefore if they were themselves challenging the taxable status, they would have to see the agreement.

 

It's not normal to have to claim tax back, no. I'm very surprised your solicitor didn't highlight taxability as an issue - it's the first thing I check on a compromise agreement and I'm amazed when firms do a crummy job advising their client!

 

What is their logic behind it being taxable? If we were talking significant sums of money then it could be correct - if for example removing the ex gratia payment and taxing the other payments separately would have made no difference to the actual amount of tax paid - but I can't advise further without knowing the exact sums and how they are broken down.

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I'm not sure on their logic of it being taxable or not, im getting the impression its too much hassle, also they are not admitting the discrimination perhaps? They are aware that an amount is a redundancy type payment so an amount is taxable (say total redundancy is £80k). In addition to that payment there is also the compensation payment, say £15k. My lawyer is saying he'll see what he can do to get them to change their minds but doesn't feel very confident??

 

Is it legal for my employers not to pay it tax free, am I within my rights not to sign the CA, what options would be available to me at this stage (it hasn't reached ET date yet), therefore im guessing it means this is without prejudice?

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If we are talking about £80k then the whole lot would be taxable due to the significant sum - as tax would work out the same if the whole lot was lumped into one, given the low tax free allowance, if you see what I mean.

 

You could attempt to ask your solicitor to get clearance from HMRC that the full sum can be paid tax free, but its unlikely, if I'm honest!

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Appreciate your assistance becky, thanks.

 

Will see what my Lawyer has got in terms of an update next week, I will update my thread if anything comes of it.

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