Alternative to Redundancy - Tax Question

jura_lab

My employer has proposed an alternative to redundancy using a scheme called an Incentivised Leavers Plan which is a years salary across the business. The issue is they have applied to HMRC for tax rules relating to this, they state it is not redundancy so does not fit with the usual redundancy tax rules so may have a negative outcome or less favourable. I am a higher tax rate payer and would like to know if there are any alternative tax rules which could apply. The ruling from HMRC will not come until after the schemes cutoff date so means you have to take a chance however we have been told if HMRC give a ruling which gives less favourable rules and does not benefit us we are able to withdraw from the plan. What do you think?

tnx

getmore4less

well universities have been giving away with 1year packages in full settlement of termination and getting the £30k tax free.

Why don't they just call it redundancy and be done with it.

Fosseboy_2

jura_lab wrote: »

My employer has proposed an alternative to redundancy using a scheme called an Incentivised Leavers Plan which is a years salary across the business. The issue is they have applied to HMRC for tax rules relating to this, they state it is not redundancy so does not fit with the usual redundancy tax rules so may have a negative outcome or less favourable. I am a higher tax rate payer and would like to know if there are any alternative tax rules which could apply. The ruling from HMRC will not come until after the schemes cutoff date so means you have to take a chance however we have been told if HMRC give a ruling which gives less favourable rules and does not benefit us we are able to withdraw from the plan. What do you think?

tnx

I agree with Getmore4less. If you receive money arising from the employment, HMRC will want to tax it. The only real exceptions are the £30k rule on severance pay. Even pay in lieu of notice is taxable if the contract allows for the employer to pay in lieu, as HMRC argue it is salary paid as a lump.

Go into the scheme expecting to pay tax and NI and agree with the employer who pays that. If you have to pay it, then what benefit is there to you in accepting it?

And it seems to me that the employer may not be able to offset it against Coropration Tax as its not a redundancy cost.