A UK compromise agreement is an agreement made between an employer and an employee. More senior employees of a company are the ones who are most likely to have this type of agreement. When an employee signs an employment compromise agreement, they receive a payment if they lose their job, which basically forfeits their right to make an Employment Tribunal claim. Most employees know that it is necessary to get legal advice before signing a compromise agreement – as without legal advice from compromise agreement solicitors, that agreement is not legally binding. However, many of them worry about the fees incurred in doing so.
Her Majesty’s Revenue and Customs (HMRC) previously used an extra- statutory concession to deal with this issue. This allowed employers to pay for their employees’ legal fees. The employer could claim back the money spent by claiming a tax deduction equal to the total value of the fees. As long as certain conditions were met, the employee was not affected from a tax standpoint, as the fees paid by the employer were not seen as a benefit in kind.
Current regulations drafted up by HMRC do not encompass compromise agreements involving the compromise of certain potential claims. For example, potential claims made under the Equality Act or made after achieving conciliation at the Advisory, Conciliation and Arbitration Service (ACAS) are not included under the current concession.
These concerns have been communicated to HMRC in the hope that the concession will be revised to cover every type of compromise agreement.
Wherever you live or work – for compromise agreement advice you can trust, contact our specialist, compromise agreement lawyers on 01722 422300.