Redundancy Tax-free Payment Help

CluckyKate

My role is being made redundant as part of a wider restructure - I've been through the consultation process and I'm definitely going so am now in the process of negotiating the settlement agreement.

I have just started maternity leave and the company are being very reasonable and have agreed to pay:
- Redundancy payment
- Payment in lieu of notice
- Maternity entitlement as a lump sum

So, onto my question:
My solicitor has suggested that the maternity entitlement covers my contractual notice period and therefore the PILON amount is effectively an ex gratia payment and should be added to the redundancy payment therefore enabling me to take full advantage of £30k tax free entitlement.

Would structuring the payment in this way be allowable by the IR?

Your thoughts and wisdom would be greatly appreciated

jazzyman01

Payment in lieu of notice is what it is - a contractual payment and as such is subject to tax.

It is absolutely required to pay maternity pay even if redundant, so is not really relevant to the PILON, bit of a red herring really.

getmore4less

I think you might be able to structure this to get the payments.

Depends if you can "do" notice while on maternity not sure about that.

They can pay whatever redundancy they like so if you can run out your notice while on maternity and then pay a payment it is no longer has PILON is just a bigger redundancy package.


they would have to pay this after your notice period, they might even be nice and let you chose which tax year to have it paid if you have less than 10weeks notice

CluckyKate

Thanks for the replies.

Fortunately they have decided to be "nice" and have moved my termination date to 30th April which means that the payment will be made in the new tax year and will therefore be taxed at a lower rate.

Jazzyman01 - I agree that PILON is contractual and that I am entitled to maternity pay, however, I'm not sure what you mean about maternity being a red herring.
As I understand it my contractual notice payment would be the maternity payment I recieve, this being what I would be entitled to if I handed in my notice today & started work with a new employer at the end of my notice period. Does this not render the amount they are calling PILON (which they've calculated as being 3 months notice on full pay) an ex gratia payment?

Thanks

getmore4less

Unless there are some rules about being paid normal wages if you are given notice during maternity I don't see a problem(but check with HMRC) with now to april being notice and them paying you what they like as a ex gratia payment after that.

Don't forget holiday accrues as well during notice.


Not sure about all the getting made redundant while on maternity the rules are all a bit different with pretections and first dibs at any jobs going etc.

Might want to wrap this all up in a comprimise agreement to keep it clean on both sides since you both seem happy with the arangements so far.