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

Pumpkinface_2

Dsmliverpool wrote: »

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.

Well done, great news.

:j

Baz_2

As the one month extra is in your contract then it is legally taxable. Your employer has it wrong IMO.

To be ex gratia means that it is not expected, but how can it be not expected if your contract says you will get it?

Dsmliverpool

It is not in the contract, it is only in the redundancy policy and my employer agreed that there is a lack of clarity. In any case i am pleased with this outcome and ask anyone in the situation to make the same line of enquiry as i have done in such testing times.

I agree with you:
As the one month extra is in your contract then it is legally taxable. Your employer has it wrong IMO.

To be ex gratia means that it is not expected, but how can it be not expected if your contract says you will get it?

However they have contacted there payroll service and the money will be paid above board and will not be taxable as it is part of a redundancy payment.

Baz_2

Happy for your result but regardless it is still expected as it is in their redundancy policy, therefore it is still expected. Unless of course your contract says you have a different redundancy policy.

I can see from your point of view this is a good result, but from the point of view of HMRC it cannot be correct.

A redundancy payment is taxable unless it is ex gratia. If it is in your contract or in the firms policies then it cannot be ex gratia. Simple as that really. Just because it is part of a redundancy payout is not enough.

mtem74

i have to agree with Baz. Did you employer go to HMRC to clarify or did they agree with you?

As you had a contractual entitlement to the money i'd say it's taxable.

to put it another way, if they weren't going to give you the extra month, could you have sued them for it? If yes then you have a legally entitlement to it and its taxable. If no, then that would support you ex-gratia arguement and mean it's non taxable.

Pumpkinface_2

I have never quite established whether the OP is working the contrcted notice or not, but assuming that they are working the notice and the extra one month is a company policy then I think it is redundancy money (and tax free) as the company can change policy at any time and is not obliged to pay the one month. And I have worked for company's that have changed such policies at will.

Dsmliverpool

So why does the law say that you can get up to £30,000 tax free redundancy? And how could up to £30,000 be paid tax free, what is this classed as? All is above board and I will try to get the actual term for reference from payroll out of curiosity.

But it would help if you could tell me what is the term for paying money to an employee that is up to £30,000 tax free, ex-gratia (which my employer told me was what my payment will be) or is it part of statutory pay? :cool: