is compensation for loss of office tax free
(Section 403 ITEPA 2003). The first Â£30,000 of compensation for loss of office on genuine ex gratia payments is tax-free. To qualify for the exemption, there must be no contractual right to the payment and it must not be in lieu of notice.An individual was dismissed from his employment in 1996.His contract of employment had provided that his employer âmay make a payment in lieu of notice to the employeeâ.o qualify for the exemption, there must be no contractual right to the payment and it must not be in lieu of notice. An individual was dismissed from his employment in 1996. His contract of employment had provided that his employer âmay make a payment in lieu of notice to the employeeâ.