tax on compensation payment

[trickey]

My wife worked for the local council before being outsourced under TUPE to a private company.
About 12 staff put in a claim through the trade union for 6 years unpaid shift allowance,
the council agreed that they should have paid the staff the shift allowance. But the employer did not want to pay the full amount to the 12 staff. In discussion with the union and employer an agreement was made that the they would pay the staff some of the backdated shift pay and worked out a deal that if they did not go to a tribunal they would pay them about three years shift allownace a compensation payment tax free. The trade union said this would be the best deal they could get for the staff.

1, Could this payment really be tax free?

[pawncob]

It seems like earning to me, so it's taxable. The fact that it's paid late doesn't change its status.