ex gratia redundancy payment, tax free??

rolandpol

are ex gratia payments , tax free??
any one?

Gordon_Hose

If it's a redundancy package then it won't be taxable.

If it's a payment in lieu of notice (PILON) it'll be taxable.

michaels

Wasn't there some discussion on here though about if the contract does not mention the option of pilon then the company could instead offer a payment for breach of contract (breach being failure to give 3 months notice) and that this payment could form part of the redundancy settlement?

Gordon_Hose wrote: »

If it's a redundancy package then it won't be taxable.

If it's a payment in lieu of notice (PILON) it'll be taxable.

McKneff

Michaels is correct.

If no mention of PILON in the original contract it is classed then as compensation. Therefore not taxable.

I wish more employers and employees knew about this. The taxman is raking in millions per year which the shouldnt

getmore4less

rolandpol wrote: »

Spoke to my boss and he claims that it isn't taxable on either side (employer/employee), not sure if I trust him, he may be trying to pull a fast one

So he will happily give you an indemnity in writing that if HMRC decide different they will pay the tax and this is a NET payment of ANY tax due.

zzzLazyDaisy

rolandpol wrote: »

Got the old redundacy heave-ho last week, my MD has given me the option of an Ex Gratia payment for the 3 months of wages i'm contracted to receive (around £6,000).

What do you mean by this? A payment can only be either contractual or ex-gratia. If you are contractually entitled to receive this payment, then it is taxable. Can you give us the actual contractual wording which entitles you to receive this payment?

jazzyman01

zzzlazydaisy I have authorised many payments in my past life free of tax because the contract was silent on pilon. There has never been any comeback.

zzzLazyDaisy

jazzyman01 wrote: »

zzzlazydaisy I have authorised many payments in my past life free of tax because the contract was silent on pilon. There has never been any comeback.

I am not disputing that. If there is no contractual right to a payment on termination (whether express or implied) then the payment is not subject to tax.

What I was querying was OP's statement that he is 'contracted to receive' the payment. If the payment is indeed a contractual entitlement, then it will be taxable. But OP hasn't been back to clarify the issue.