More redundancy questions and tax paid (incorrectly??)...

medonna

I'm another one that's being made redundant and have a few questions about the money I'm getting and the huge amount of tax I'm having to pay on my very small package after 8 years and 11 months....

Redundancy payment (8 weeks @ £129.78) 1,038.24
Pay in lieu of notice (8 weeks ") 1,038.24
Holiday pay 188.18
Loyalty payment 750.00

Total 3,014.66

Unfortunately, the accountants worked out that I'd be paying around £450 in tax and NI so my questions are :-

1. Couldn't the accountants pay it as 8 weeks redundancy @ £376.83 so it could be tax free?

OR

2. I have just discovered that up to £30,000 of redundancy payments are tax free and below is a quote from http://www.direct.gov.uk/en/Employment/RedundancyAndLeavingYourJob/DG_10026689

"Is your notice pay taxable?

If you work your notice, you'll be taxed at the usual rate on the money you earn in your notice period.
PILON is only taxable if it's been provided for in your contract or is customary. Otherwise, it is not taxable unless the PILON together with redundancy and other compensation adds up to more than £30,000, in which case the excess over £30,000 is taxable at the usual rate."

I didn't work my notice and as such the PILON is not wages owed but is damages for breach of contract so why can't I get this applied to me?

Any suggestions as to how I can get as much of my money as possible would be greatly appreciated!!

greenflamingo_2

Hi Medonna
I have the exact identical problem having had nearly £2K taken out of my "PILON" in tax and NI which is in fact damages for breach of contract. In addition I got a lump sum which was free of tax and N.I. I would say however that in my case I am arguing that this is not "wages" even though my employer have written "PILON" on my wage slip because no deductions have been removed for company pension contributions (which I paid monthly) and union subs so as far as I am concerned it is not the same as the wage slips I received previously. I have written to my local tax office pointing out the exact same thing and requesting how I get a refund of tax and N.I. It is bad enough to lose your job without the tax man grabbing his share!

LittleVoice

You cannot count notice pay (PILON) as redundancy pay because it isn't. You can't count holiday pay as redundancy pay because it isn't.
You can't count the loyalty payment as redundancy pay because it isn't.

Whether PILON is taxable depends on its status in your contract - just as you have quoted in your original post.

Debt_Free_Chick

medonna wrote: »

I didn't work my notice and as such the PILON is not wages owed but is damages for breach of contract so why can't I get this applied to me?

Assuming the PILON is in your contract, then it's not damages for breach of contract. The contract is specifically stating that you will get exactly the same payment as you would have had, if you had worked your notice. Ignoring the protection given under employment law, from a contractual point of view the employer is saying "we have the option to end this contract and if so, we'll give you three months notice or the equivalent of the pay you would have had for three months, with no notice".

Of course, employment law doesn't allow the employer to end an employment contract in this way, but it's helpful to ignore that bit when considering the remedy for breach of contract - the remedy is the PILON, as you are receiving exactly the same as you would have received, if they'd given you the notice instead (i.e. you'd served the notice). You need only be "no worse off" - you cannot make a claim to be better off. In any event, HMRC have ruled that contractual PILON is taxable (as it's not damages, which is taxable under a different section of the taxes act - used to be s148 of ICTA 1970, but now somewhere else ..... sorry not sure).

EDIT: compensation for loss of office is now in s401 ITEPA 2003 (Income Tax (Earnings and Pensions) Act 2003).

You might want to trawl through HMRC's own manual on this, but it's likely to send you giddy!

The redundancy element is the damages - the PILON is contractual and therefore cannot be damages.

McKneff

I think you will find that NI is not refundable

greenflamingo_2

Thanks all.

There is absolutely no reference whatsoever to PILON in my employment contract, which btw is over 20 years old so I guess at that time redundancies were not the "norm".

As I understand it then if you can show you are financially worse off as a result of the employer breaking your contract you have a valid claim? Bear in mind that my employer has made over 50 people redundant and done the same on each of them, so saving itself a heavy sum of money.

I would have accumulated 6 days annual holiday (£500+) and also 13 weeks pension contributions payable by the company into the pension scheme (£900+) if the notice period had been honoured. Therefore I am worse off.

Also, of course the company pension scheme has suffered by the companys actions -is this legal?

LittleVoice

I am surprised they are paying you holiday pay - I would have thought they would argue that they would give you notice to take your accrued holiday during your notice period.

reheat

LittleVoice wrote: »

I am surprised they are paying you holiday pay - I would have thought they would argue that they would give you notice to take your accrued holiday during your notice period.

When I left I was paid for all holiday intitlement days - up to my leaving date - I'd not actually taken as holiday.

LittleVoice

reheat wrote: »

When I left I was paid for all holiday intitlement days - up to my leaving date - I'd not actually taken as holiday.

I realise that is what they have done - paid for accrued holiday not taken.

What I was suggesting was that they could have given you notice that you needed to take the holiday and that this would have been in your notice period and therefore they would only pay once - for the notice period and not more for the holiday. From that viewpoint you have gained a little.

Debt_Free_Chick

greenflamingo wrote: »

Thanks all.

There is absolutely no reference whatsoever to PILON in my employment contract, which btw is over 20 years old so I guess at that time redundancies were not the "norm".

Could you please post the precise words that appear in your contract, for the employer to terminate your contract?