Payments made on the termination of an employment contract were not subject to tax as general earnings, but were subject to tax as employment income to the extent that they exceeded £30,000, and could not be apportioned over a notice period overlapping two tax years.
The appellant was informed by his employer that his employment contract would be terminated, and in October 2012 he entered into a compromise agreement with the employer.
The compromise agreement provided (among other things) that the appellant’s employment would terminate on 31 January 2013; he would receive £15,000 (including statutory redundancy entitlement) as compensation for loss of employment and damages for breach of contract, etc.; £47,521 as pay in lieu of notice and accrued annual leave; and £100 in respect of certain undertakings given. The payments were made to the appellant on 31 January 2013.
