The Inland Revenue is understood to be about to clarify and confirm its approach to the £30,000 "golden handshake" tax exemption on compromise agreements.
A difficulty arose with some tax offices refusing an exemption (and claiming tax on the full amount) where the compromise agreement said compensation was repayable if the employee broke the agreement.
The Revenue is understood to now hold the view that this is wrong and that such a provision does not take the compensation outside the tax exemption. Formal publication is expected in October's Tax Bulletin.
Our view remains that such repayment provisions are probably legally unenforceable, either because they are penalty clauses, or because they are "unfair" under the Unfair Contract Terms Act.
