§ Mr. Arthur Lewisasked the Chancellor of the Exchequer whether severance payments made by public companies to their retiring directors and dismissed directors are tax-free to the recipients; and whether such payments made by companies are allowed to be set against the companies profits as a normal business expense for tax relief.
§ Mr. TaverneIn general, the position is that payments to which a director was entitled under his contract are taxable in full. Other lump sum payments are taxable under the " golden handshake " legislation; but the first £5,000 of such payments is not chargeable to tax. In most cases such payments would be an allowable business expense of the employer.