PAYOUT settlements are seldom tidy affairs. They invariably lead to disputes between both sides over terms, conditions and the amount owed. The current dispute between the UK-appointed expatriate civil servants and the British Government over the terms of their payout is no exception. Negotiations have been underway for the past two years to reach agreement on the amount of compensation, made necessary because of the change of sovereignty. Through historical circumstance, this group of British-appointed civil servants, who number about 700, have found that their career prospects have been severely curtailed. As part of the decolonisation process of Hong Kong, the British Government has agreed in principle to pay them a lump sum of up to GBP120,000 each, whether or not they stay on through 1997. However, a new rub has appeared in the negotiations. The expatriates have discovered that the lump sum may be subject to British tax, which could wipe up to 40 per cent off their payments. It is little wonder that the expatriates are crying foul. In all the months of negotiation, the subject of taxation was never mentioned, according to Michael Cartland, chairman of the association representing the expatriate civil servants. Members assumed that like their counterparts in other colonies given up by Britain, their payouts would not be taxed. However, an amendment of British tax laws in 1987 has changed that and now expatriate civil servants face the real possibility of being taxed. The Foreign Office should not allow this to happen. To do so would be moving the goal posts very late in negotiations that have already taken two years to reach this stage. The Foreign Office must have known about the amended tax laws before negotiations started and to suggest now that any payment is liable to British tax is an act of bad faith. The Foreign Office should do everything in its power to stop the British tax authorities from penalising expatriate civil servants who have worked hard for a fair deal on their earnings in Hong Kong.