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Can you agree a retrospective termination date under a settlement agreement?

19 September 2019

This may be problematic as the settlement agreement should reflect the reality of the situation. If the settlement agreement expresses an earlier termination date and the employer only pays tax and national insurance to that earlier date, you could potentially find yourself in trouble with HMRC. It could also be considered a fraud against the Revenue if part of the employee’s salary (due but unpaid) was paid to them as part of the ex gratia payment so as to avoid paying tax and national insurance under the £30,000 tax free exemption.

We therefore advise against this approach.

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