Contractual payments must be made subject to usual deductions for tax and national insurance. Whereas a genuine ex-gratia payments are not made for work that has been undertaken or for a provision of services or under a contract of employment and are essentially compensation for loss of employment or a “gift” by the employer. Consequently they can be paid free of tax up to £30,000 pursuant to section 403 of the Income Tax (Earnings and Pensions) Act 2003.
Tier 2 Sponsors and Tier 2 Sponsored Workers Salary reduction for Tier 2 sponsored workers In circumstances where a business cannot pay the salaries of sponsored workers because of a reduction in trading, the salary of sponsored migrants can be reduced to 80% of their salary or £2,500 per month, whichever is the lower. This…Read More