By If you`re working in the UK and considering leaving your job, it`s important to be aware of the concept of a compromise agreement with HM Revenue & Customs (HMRC). This agreement is a legally binding document that provides a way for you to settle any outstanding tax liabilities owed to the government.
To put it simply, a compromise agreement is a legal contract between an employee and an employer that resolves any disputes or claims arising from the employment relationship. In the context of HMRC, it`s an agreement that resolves any potential tax liabilities that may arise from the termination of employment.
The purpose of the compromise agreement is to protect both parties. For the employer, it ensures that they are protected from any future claims from the employee, and for the employee, it provides financial compensation that is tax-free up to a certain amount.
When it comes to tax liabilities, it`s important to note that any payments made under a compromise agreement are not taxable up to £30,000. This means that if you receive a payment of £30,000 or less, you won`t have to pay any tax on it. If the payment is over £30,000, the excess amount will be subject to tax and National Insurance Contributions.
It`s important to note that compromise agreements are voluntary and can only be entered into if both parties agree to the terms. The employee is entitled to have legal advice before signing the agreement, and the employer is responsible for paying for this advice.
If you`re considering a compromise agreement, it`s important to seek advice from a qualified legal professional. They can help you understand your rights and obligations, and ensure that the agreement is fair and reasonable.
In summary, a compromise agreement with HMRC is a useful tool for resolving any tax liabilities that may arise from the termination of employment. It`s important to seek legal advice before signing the agreement to ensure that it`s in your best interest.