COT3 agreement

[DonkeyCup]

Not sure where to post this, so apologies if this is the wrong place.

DH has called HMRC for advice on numerous occasions in the last 6 months. Each time he's told the that the person he needs to speak to will give him a call back, but this hasn't happened yet.

DH was dismissed for gross misconduct last year, with immediate effect. He received no notice or notice pay. DH had worked there for over 2 years. The allegation was fabricated by the business owner.

DH sought advice from a friend, experienced in employment law, and subsequently went through the ACAS early conciliation process. A pre-tribunal agreement was reached, via a COT3 agreement.

DH received a payment consisting of two elements:

• an amount in full and final settlement of the potential claims of Unfair Dismissal and Breach of Contract;
• an amount in lieu of his loss of statutory rights.

My question is are these payments subject to tax and/or NI contributions?

Many thanks 😊

The ex gratia payment will depend on its value. Anything over the threshold is subject to tax and NI. A PenP calculation should also be done as that may make an additional amount taxable

Anything paid in lieu of notice/holiday pay etc is subject to tax and NI.

But these should have gone through the employers payroll before it was paid out to your husband so should have been taxed before it was paid and a payslip provided