Tax Gross-Up Clauses: How Payments Stay Whole When Tax Gets Involved

If there’s one thing guaranteed to ruin a perfectly good payment, it’s tax.
That’s why clever lawyers came up with the tax gross-up clause – a built-in promise that the payee won’t lose out just because the taxman’s feeling peckish.

The Problem It Solves

Imagine you’re expecting £100.
The other party pays from abroad and, by law, must send 10% to their local tax authority. You end up with £90 instead of £100. You agreed a deal – but tax has moved the goalposts. Cue a collective sigh.

A tax gross-up clause fixes that. It says: if tax has to be withheld, the payer must increase the payment so the receiver still ends up with the full £100. In short, the payer pays the tax on top, not the payee out of their share.