Redundancy Payment tax or no tax?.. Please help asap!!

Dsmliverpool

Hi There, I am currently on notice by my employer as the project I work on is coming to an end. My entitlements as per there redundancy policy is statutory and one months pay. This is in addition to any days I have worked and I will be paid as normal in my last month.

So in my last month I should get 2x month pay and statutory pay. Now is this additional month pay taxable? My employer is trying to say it is Payment in Lieu of notice, but is this not possible as I am currently work the notice period they served me??

I see all over the web about this £30,000 redundancy pay tax free limit and by the sounds of it I fall into it. Isn't my additional months pay just redundancy pay?

Please help as I am now stuck and could do with the extra cash!!

Pumpkinface_2

Without knowing for sure your notice period and dates etc, I would not like to say for sure. But if that extra month is ex gratia and you are working your notice, then I am inclined to agree with you, the one month sounds like it should be part of the redundancy package and part of the £30k tax free.

Elaine_Wilson

It certainly sounds as though it should be tax free. You will need to examine your contract carefully, though, to make sure.

Check to see what notice was stipulated in the contract and ensure that you have been given the full amount. If so, then you can confirm that it is not a payment in lieu of notice.

Does the contract mention this extra month? If it does it may depend on the exact wording to ensure it is corrrectly treated as redundancy pay. This link is to an example in the Revenue's internal manuals where a payment is broken down into its constituent parts. You need to make sure the extra month is not treated as a bonus like the second part in the example. By the way, in the example anything charged to section 62 is earnings. You need the payments to fall within section 401 ('cos that's where the £30,000 exemption is).

Dsmliverpool

Hi there,

Thanks for the information.

The actual phrase in the policy is:
6.6 In addition to entitlement under statutory provision, staff being made redundant shall receive one month's salary.

Any tips?

Dsmliverpool

I have spoken to various agencies and they say that if they have served me my notice then I can not receive payment in lieu of notice as my notice has already started? So it must be classed as part of the entitlement?

Pumpkinface_2

Dsmliverpool wrote: »

I have spoken to various agencies and they say that if they have served me my notice then I can not receive payment in lieu of notice as my notice has already started? So it must be classed as part of the entitlement?

I think you need to go back to your employer and argue this vociferously.

Elaine_Wilson

Dsmliverpool wrote: »

The actual phrase in the policy is:
6.6 In addition to entitlement under statutory provision, staff being made redundant shall receive one month's salary.

Any tips?

I'm not an expert but I would argue that this puts the extra month firmly into being a redundancy payment and therefore subject to the £30,000 exemption.

I agree with pumpkinface - go back to the employer and tell them their previous explanation is wrong.

John_Pierpoint

If its in your contract how can it be and ex gratia addition to statutory redundancy?

I think that will be the tax man's attitude.

Presumably you are only working the one month notice not two?

pete80

Your employer SHOULD be trying to offer you the best option. I was made redundant 27 years ago and received double the Statutory Redundancy entitlement (2 weeks per year instead of 1) and 12 weeks in lieu of notice although I had only worked there 4 years. This was all paid free of tax.

More recently I was retired through ill health and again received 12 weeks lieu of notice which also was paid free of tax.

Whether the conditions differ under different employers, I don't know - maybe it was part of an agreement with the Unions.

As already advised I would speak again to your employer and hopefully they will see reason.

Good luck in your hunt for your next job!

Dsmliverpool

The redundancy policy states:

6. ENTITLEMENTS

6.1 All statutory entitlements shall be paid by xxxxxxxxxxxxx. In addition, staff will have the following entitlements.

6.2 Staff being made redundant shall be given no less than their contractual period of notice, but where possible will be given not less than 12 weeks notice.

6.3 Staff being made redundant may leave prior to the contractual period of notice without loss of redundancy payment, but without payment of salary for the remaining period of notice.

6.4 Staff being made redundant shall be given time off with pay to attend interviews with alternative employers.

6.5 Staff may opt for voluntary redundancy if they are in a post whose termination would enable xxxxxxxxxxxxxxxxxxxxxt to avoid a planned redundancy. If voluntary redundancy is accepted by xxxxxxxxxxxxxxxxxx, such staff shall be eligible for all entitlements specified in Clause 6 of this policy.

6.6 In addition to entitlement under statutory provision, staff being made redundant shall receive one month’s salary.

and my contract states under termination of employment by employer:

During your probationary period xxxxxxxxxxxxxxxxx will give you one weeks notice in writing and an ex gratia payment equivalent to one week's salary.
after probationary period four weeks notice in writting will be given.
after four years the period of notice for xxxxxxxxxxxxxxxxx will be increased by one additional week for each year of service, up to a maximum of 12 weeks notice.

There is no mention to it being ex-gratia or part of a bonus etc.. That is my point, there is no clarity in that line and I think my employer can pay in another way but won't as there tight. Hence the pretence about payment in lieu of notice etc. I have been there for 2 years and 4 months.

What do you lot think?

Dsmliverpool

I have won my case, my employer is now paying this as tax free mponey and will be classed as ex-gratia payment linked to redundancy payments and therefore tax free. great stuff and thinks for the support.:beer::j

There will clean up the policies for the future so this is very clear what will be paid out.