Wednesday, 29 July 2015

At last Government to simplify tax on settlements

It looks as if The Government is at last to simplify a delineated system of ascribing tax to settlements. We all know that tax and employment tribunal decisions have been at odds in the past and in order to advise clients you have to tip toe around case law and guidance of Byzantine complexity. Well fortunately, The Government have decided to launch a consultation.

The best bit is that the proposal as it stands (para 10) will remove the distinction between the tax and NICs treatment of contractual and non-contractual termination payments. This will hopefully remove the majority of the complexity and misunderstanding within the existing system.

This blanket exemption it is proposed will be set at a lower threshold than £30,000. It is reported at 4.16 that:

'One approach the government is considering is to create a new exemption which increases proportionately with the number of years of service the employee has completed. This would create a new fairer exemption which will proportionately reward long serving, lower paid employees.'

We shall wait and see whether there is devil in the detail.

Responses to the consultation can be emailed to: employmentincome.policy@hmrc.gsi.gov.uk.

www.charlesprice.net

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