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Tax Indemnity Clause in Settlement Agreement

Employment and Discrimination Law

Re: Tax Indemnity Clause in Settlement Agreement

Postby atticus » Sun May 14, 2017 7:06 pm

I'd work with the employee on minimising what he may have to pay, probably try to persuade the employer that it is not worth his while trying to enforce that indemnity.

Although a £7K tax and penalties liability on a £5K payment seems extreme.
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Re: Tax Indemnity Clause in Settlement Agreement

Postby Scienke » Sun May 14, 2017 7:16 pm

Yes it's a silly and unlikely scenario but I've had some employers who are very bad at tax stuff. I can only imagine what they'd be like if they had a contract in place that could potentially hold someone else liable for their inaction and incompetence.

If they left it for long enough the fines and penalties could add up. If such an extreme example were to arise could the employee take the view that he'd be financially better off simply to pull out of the agreement and pay the 5k back. Then would he no longer be liable to pay the 7k tax bill?

Could the employee argue that the employer was being unreasonable and that they did not mitigate their losses by allowing the bill to spiral so out of control?
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Re: Tax Indemnity Clause in Settlement Agreement

Postby atticus » Sun May 14, 2017 7:31 pm

Why would this employee want simply to capitulate? See my earlier reply.
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Re: Tax Indemnity Clause in Settlement Agreement

Postby Scienke » Sun May 14, 2017 7:35 pm

How could you go about persuading an employer that it might not be worth trying to enforce the Indemnity? What could you say to convince him that it wouldn't be in his interests to enforce the Indemnity?
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Re: Tax Indemnity Clause in Settlement Agreement

Postby atticus » Sun May 14, 2017 7:44 pm

examination of the full facts and circumstances may give something to go on.
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Re: Tax Indemnity Clause in Settlement Agreement

Postby Scienke » Sun May 14, 2017 8:06 pm

atticus wrote:examination of the full facts and circumstances may give something to go on.


Yes. Very true.
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