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Taxation of termination payments?

The Office for Tax Simplification (OTS) recently recommended that the £30,000 tax exemption for certain termination payments be scrapped and replaced with a new relief available only to employees who qualify for statutory redundancy payments.

Under the proposal all payments made to such employees would be exempt from tax.  The OTS believe this will be simpler and provide certainty for both employers and employees.

If the OTS’s proposals were to be adopted, termination payments other than in cases of redundancy would be taxed in full.  Employers may be concerned that this will increase the termination costs.  Employees may also be concerned at the loss of a valuable tax exemption.

The proposals will require a policy decision from the Government, which may not be made until after the election next year.



Date: 3rd October, 2014
Author: Cathy Corns


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