The taxation of settlement agreements: a new approach?
Joshua Carey and Marianne Tutin discuss an important tribunal decision concerning the taxation of sums paid under settlement agreements.
The case of Mrs A v HMRC is a stark reminder of the importance of employees obtaining specialist tax advice as to the terms of a draft settlement agreement entered into with their employers before signing it. In particular, the FTT held that ITEPA 2003 s 225 applies to any undertaking which restricts an individual’s conduct or activities when it is given in connection with a taxpayer’s employment. The tax treatment of sums paid under any settlement agreements must be considered carefully, particularly where the agreement includes any potential restrictive undertakings and the payment of the sum is connected to the termination of employment, given the central importance of the contractual position.
The full article can be read in The Tax Journal here.
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