Discrimination Settlements and Tax

You work hard for your employer, however throughout your employment you are discriminated against, due to your age and disability.

Eventually you have had enough.  After a long process which resulted in your lodging a claim with the employment tribunal, your employer agrees to make an out of court settlement to compensate you for the discrimination you suffered.

The discrimination payment is paid to you, however it is paid net of income tax.

You question this and are told that because the payment is being made in connection with your employment it is correct to pay income tax on the settlement figure.

This position is not correct! We have helped many clients reclaim income tax which has been incorrectly deducted from their settlement figures.

A discrimination payment is not a reward for service, far from it in fact, and should not be taxed as employment income.

In some cases, a discrimination payment may be taxed in accordance with the rules which apply to termination payments.  However, this is only where the discrimination is in connection with the termination of the employment itself.

In all other cases it is our view that a reward paid in respect of discrimination occurring before the termination of the employment should not be taxed.

This is a complex area of tax law and it can be quite difficult to identify the value of any settlement which should have been paid tax free.

However, we have successfully supported clients in obtaining refunds where settlements awarded for discrimination, personal injury, disability and injury to feeling have been taxed incorrectly and are leading experts in this area.

Please contact Jamie Favell to discuss your situation and how we can assist you on 020 8037 1052.