Settlement Agreements are used where an employee and employer want to come to an amicable solution and avoid Tribunal proceedings.
On 24 July 2015, the government launched a consultation on simplifying the tax and NICs treatment of termination payments.
Proposals include:
The government also seeks views on possible alignment of income tax and NICs rules.
The government has recognised that simplification is required and its proposals should lead to greatly reduced burdens on those determining the tax position at a stressful time. It is welcome news that unfair and wrongful dismissal, as well as redundancy, are to benefit from exemption.
This will be good news for some and bad news for others. Those with less than two years’ service will be disadvantaged, and the effect for those with longer service will depend on the rates of exemption that are set. The refocus on the residence of the employee, rather than the place of service, will affect some employees, although the alignment with the rules for taxing earnings makes sense.
The removal of certain existing exemptions, such as indemnity insurance benefits, may also be disadvantageous. While the exemptions for illness and disability are to be retained, there is no mention in the consultation document of exemption for death.
If you would like Davenport Solicitors to support you with further advice on Settlement Agreements or to speak to our specialist settlement agreement lawyers, contact us. Email contact@davenportsolicitors.com, call 02079 036888, or visit our contact us page.
