Tax implications of returning to same company after accepting a redundancy payment..

Jibbah24

Just a quick note to say that I have also posted this in the redundancy section but as it's a tax issue I thought it might be worth posting here as wel.


Hi..

I'm currently half way through my 4 week consultation period and was curious as to what the situation is with regards to tax should I accept the redundancy package on offer and then return to the same company within a month or so in a different role.

My current job is being axed but I am ever hopeful that I may be able to slot back in in another department where my skill set would fit nicely.

I know the first 30k of the redundancy payment is tax free but would the tax man be after a chunk of this should I be back on the payroll in the very near future?

Is it better to try and return on a contractor basis?

Thanks in advance for any/all advice!!

PS: I have been reading through a lot of the emails, and on behalf of all those who are posting their queries I would like to say a big thank you to those of you 'in the know' who are helping to guide us through what can be a very difficult time!! Much appreciated!!

:T

Elaine_Wilson

Provided this re-employment is not part of a predetermined scheme then I would think the tax free allowance would be safe. The tax status needs to be determined at the time of payment so only events up to that time will be taken into account.

But it will only apply in a proper redundancy. Part of the procedure is to find alternative employment in the company. Why are you not moving to the other department now as part of the redundancy negotiations?

Do you know that the job will become available while your employer has no inkling?

Andy_L

Your employer may have a clause in their T&Cs of employment that re-employment within x months requires you to repay the redundancy and/or any notice pay

Jibbah24

Hi Elaine & Andy.....thanks for you quick responses!

The redundancy is legitimate and they are currently offering us a role which is very similar to the one I'm already doing, only it will have double the target and half the support and as such I'm not keen on applying for it. I can't help thinking that I'd be just opening myself up to being 'performance managed' out within six months and therefore leave with nothing.

The other role isn't guaranteed at present and I would still have opted for the redundancy should it not have come up.
I was told about the other role by a colleague who is the manager of the team in question and as far as I know this has not been made public yet and I am hoping this stays the same until my final day. This would then mean that it's a brand new position and one that wasn't on offer during my consultation period.

I can find nothing in the T&C's about re-employment and when I raised the possiblility during my intial consultation interview they didn't seem to have any policy in place.

Elaine_Wilson

I have never dealt with this situation but my feeling is that HMRC would not come to you for any tax on the redundancy payment.

I'm reasoning as follows. This is not a voluntary redundancy so you are not complicit in a tax avoidance scheme. Your knowledge is immaterial to ascertaining the tax position of the redundancy payment. (It would be relevant if you had suggested being made redundant in order to effectively recieve some salary tax-free)

So they would look to see if it is a proper redundancy. All the rules seem as if they are being followed so the employer will be entitled to use the allowance to pay the first £30,000 with no deduction.

If the employer becomes aware of the new position then it may be more complicated.