Settlement agreements—how confidentiality and non-disclosure obligations can affect the tax treatment of termination payments

A recent first-tier tax tribunal case has re-iterated how important the description given to respective portions of an employment termination settlement package can be for tax purposes. It acts as a stark reminder that the rules on payments to an employee agreeing to restrictions do not just catch traditional restrictive covenants (e.g., restrictions on working for a competitor or soliciting clients etc for a certain period post-termination) but can also relate to a payment made for any undertaking given by an employee as part of their settlement agreement.

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