Employment Disputes: The Implications of Taxing of Settlement Receipts as Eligible Termination Payment

Abstract:     
The recent application of the eligible termination payment provisions to amounts received on the settlement of employment-related disputes has lead to the result that such payments are taxed on the same basis as other employer-funded termination payments, such as golden handshakes. However, these settlement payments are fundamentally different in character to golden handshakes and arise from disputes which will often raise a number of issues, including claims which are personal in nature such as unfair dismissal or defamation. This article seeks to comprehensively analyse the various taxation regimes which may be triggered by such receipts and questions whether any coherent policy can be identified to support the level of taxation which these regimes provide.

Number of Pages in PDF File: 53

Keywords: income tax, termination of payment, dispute settlement, tax, employment, dispute, termination

JEL Classification: H24, K34, E24, K10

Accepted Paper Series