Produced by Tolley

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Illegality
  • The effect of illegality in contracts
  • Removing illegal terms
  • Illegality by one party only
  • Illegality and discrimination
  • Contracting-out provisions
  • Restrictive covenants
  • Confidentiality provisions

The effect of illegality in contracts

A contract tainted by illegality is deemed unenforceable. It cannot be relied upon by either party attempting to enforce contractual obligations. Common types of illegal contractual terms are:

  1. terms relating to pay which try to evade tax laws (eg by paying cash in hand)

  2. contracts with people who are not legally entitled to work in the UK

  3. contracts to do types of work which are illegal or contrary to public policy, such as prostitution

Note that all case references in this guidance note are subscription sensitive.

The inability of parties to rely on illegal contracts applies irrespective of whether those parties knew, at the time that they entered the arrangements, that they were illegal.

Work performed under an illegal contract will not count toward a period of continuous employment and will also constitute a break in a period of continuous employment. See the Continuity of employment guidance note.

Illegal terms will not be enforced if they are deemed illegal. However, it is important to draw a distinction between two types of contracts tainted by illegality:

contracts that are illegal from the start either because they are entered into with the intention of committing an illegal act or because

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