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Features: Law matters
Taxable income
A negotiated settlement for an employee to leave work can be fully liable for tax. Unlike redundancy pay, this is not tax-free for the first £30,000. Negotiated settlements are not necessarily payments in compensation for a breach of contract which is why they can be liable for tax, according to the High Court.
(Richardson (Inspector of Taxes) v Delaney, The Times Law Reports, 11 July 2001)