In Peter Andrew v HMRC [2015] UKFTT 514 (6 October 2015) the FTT found that a redundancy payment made under a compromise agreement was fully taxable.
Mr Andrew had been dismissed from his employment without notice. He had entered into a compromise agreement under which he had been paid £68 800. The issue was whether the exemption for the first £30 000 of a termination payment (ITEPA 2003 s 403) applied.
The FTT noted that under Mr Andrew’s employment contract the company could make a payment in lieu of notice (PILON) for the six months’ notice that Mr Andrew was entitled to. It added that the compromise agreement recorded the fact that Mr Andrew considered that he may have a claim against his employer; and that the compromise agreement was in full and final settlement of any such claim. The compromise agreement also provided that the amount payable...
