Compromise agreements - tax-free sum or taxable?

[seoladair]

I know comp agreement settlements can often be tax-free, but I thought that was only the case if the employee is to be leaving.
After a major battle with HR (which I won) I have been offered a comp agreement. HR know that I intend to carry on working, so I'm not sure the sum can be tax-free. Can any of the HR experts shed some light? Thank you.

I'm not expert, but I'm pretty sure only the Revenue can rule on whether something is tax free. Could you aim instead for some wording that your stbx employer will settle any tax liability which might arise?

When you leave that payment is usually a "redundancy" payment and so can be tax-free up to £30,000. Any pay in lieu of notice (PILON) and holiday pay should be taxed at the standard rate.

If you are not leaving then I would be asking for the amount to be before tax unless they can demonstrate that you will not be taxed. Put the onus on them.

Your solicitor should be advising you on this too. It's part of their job to make sure the contract is favourable to you.

Are you definitely not being terminated?

It depends whether you are contractually entitled to the money or not. PILON would be taxed if there is contractual provision to pay in lieu of notice in the contract, if not, paying in lieu is technically a breach of contract meaning the amount is effectively compensation for at breach and therefore not taxable.

Seola what is the amount for- your SMP? If so, it's subject to tax.

Spent ages typing message, went to change baby's nappy, finished message, posted it, then mumsnet did something weird and the message was lost! Aaargh! Will try again next time baby's asleep! That's the third time that's happened to me on mumsnet....

They aren't my stbx employer, as I've decided not to be pushed out. I love working there, and normally have no contact with the management people who tried to prevent me receiving SMP.
They know I have no intention of leaving, and said the comp agreement wouldn't be an exit strategy. I don't trust them though...

The sum is not for SMP; HMRC forced them to pay SMP, and I then requested an extra sum which I should have received under their quite generous maternity pay scheme. This was also to include an element of unpaid holiday pay.

They said I had no contractual right to anything at all, so couldn't have the money unless I signed a non-exit comp agreement and employment contract. Signing would involve waiving rights to make various claims, and signing away my years of employment as they would date my continuous employment from the date of the contract.

As there never was a written contract, I should have received the money, as I fulfil the conditions of employment. I'm suspicious of the whole thing - they told me to keep their offer of an employment contract secret from my colleagues, who have exactly the same working conditions as me.

I'm not asking the solicitors much, as I feel bad about taking up their time. At the outset they advised me that I'd receive much more money if I decided to leave. As I'm staying on, any settlement will be low, so there won't be much of a fee for them (they took the case on a no-win, no-fee basis.)

Here's what I need to know - the latest correspondence from HR reitereated that they don't see me as an employee (even although they want me to sign an employment contract which would cause me to waive employment rights ????) Should I respond saying that I've been advised by ACAS, my lawyer, HMRC and Mumsnet that I am an employee? If I don't do this, will it be viewed in law as tacit acceptance of their position that I am not an employee?

I would advise you not to sign anything waiving your rights or signing away your continuous service, as that could make a big difference in the future in the event of any redundancy situation for example.

Both your solicitor and ACAS and Mumsnet have advised you that neither you nor your employer get to choose whether you are an employee or not. Either you are or you are not, and the decision is made by the nature of the relationship between you. This is something that HMRC and/or an employment tribunal rule on after examining the individual circumstances. It would be extremely unlikely a tribunal would disagree with any ruling on the matter from HMRC although they would come to a conclusion independently. HMRC have already ruled that you are an employee so that is exactly what you are and you are confident that if you assert your employment rights in an employment tribunal the tribunal would agree with HMRC, ACAS and your solicitor.

I would put that in a response to your breathtakingly incompetent HR team.

Thank you. But have I run out of time on this matter? It has been going for more than 3 months, so does that mean I would now be unable to bring any sort of claim?
Also, if I turn down their offer, and they say that's the end of negotiations, then am I in a weaker position?

I think there is a discrimination claim in here IIRC, in which case you have to raise a grievance with your employer within 3 months of the incident. If you did that the time limit for a tribunal claim is automatically extended to 6 months. The tribunal does have some discretion to hear a late claim. Your solicitor is best placed to advise.

If you turn down the current offer they have three choices:

• come up with a better offer
• dismiss you, which starts the 3 months clock ticking again and allows you to bring a claim for unfair dismissal
• end negotations. If they do it is time to take them to tribunal in my view

And agree with flowery (especially the crossed out bit in her final sentence!).

So let's say SMP was finally paid to me exactly 3 months ago today, would today be the final day for lodging a grievance?

Sorry, to make that clearer, let's say SMP instead of the more generous maternity sum was paid 3 months ago, would today be the final day for a grievance?

Your HR department sounds as incompetent as mine.

Lots of luck.