Advice please on cot 3 and tax 'trick' played by former employer

METAL_MICKEY

Background is that i was made redundant in Nov and due to issues with the consultation process i subsequently issued an Employment Tribunal claim. However, the need for an ET hearing was negated as through ACAS i brokered a settlement via a COT3 agreement. Simply enough you would think as former employer wanted to avoid ET and i was happy with their second amount offer and chance to forget whole sorry incident.

This is where it got tricky and now i feel i have been mugged big time and very poorly advised. As i had been in job for many years i did get a decent redundancy sum plus PILON payment which took the final amount over the £30K tax threshold. Accordingly, that redundancy payment paid in Nov was £30K tax free but the remainder was taxed to the extent that £6K tax paid. No problem there as i knew that was the case. However, come February i sign off and agree the COT3 agreement for an amount of £6K which i incorrectly think is what is going to be in my pocket and therefore is the precise amount i negotiated with my former employee. However, when payment hits my account it is about £1500 shy as i have been taxed again.

Via ACAS i queried this and overly agressive reaction of former employer is effectively get lost and if you have a problem you can issue a civil court claim. ACAS on my behalf ask again and 2nd time the politer reply quotes case law 'Norman v Yellow pages' and accompanying letter explains that their standard COT3 is "silent" re, tax situation and i should sort out with HMRC. Ultimately, i now learn that effectively my £6k figure is counted as part of the original redundancy payment and since that was over £30K i am taxed accordingly. In short the £6K i agreed to was not in fact £6K and my former emplyers knew that during the negotiation.:mad:

Just to confirm that ACAS had never heard of this and of course their fall back position is that they don't actually advise on such issues which i sort of understand. In addition, the solictor i used via the trade union approved the COT3 before i signed and did not suggest i make any query about the tax treatment of the full and final amount of £6k which i thought i had agreed.

Any advice or observations on this as i think i have been very cleverly screwed by my tax savvy former employer? My point is that theoretically had i known about this tax scenario i could have attempted to negotiate a higher amount to ensure that i was happy with the actual amount in my pocket. In addition, as with most COT3's it contained a standard confidentiality clause so how do my former employers expect me to explain this to HMRC without technically breaching that agreement?

Jarndyce

Why is this anyone else's responsibility but your own?

Assuming that at no time did anyone actually say to you that this money would be tax-free, then it was up to you to ascertain whether or not it was. Certainly ACAS would never take responsibility for advising you about your own tax position (which is what it is because it is only taxable due to you having received the other redundancy pay). Whilst your union solicitor might well have flagged this up, again it is not ultimately their responsibility to advise you on your tax affairs.

So no-one has misled you and no-one has lied to you, and you have nobody to blame except yourself for making assumptions and being in this position.

METAL_MICKEY

Jarndyce wrote: »

Why is this anyone else's responsibility but your own?

Assuming that at no time did anyone actually say to you that this money would be tax-free, then it was up to you to ascertain whether or not it was. Certainly ACAS would never take responsibility for advising you about your own tax position (which is what it is because it is only taxable due to you having received the other redundancy pay). Whilst your union solicitor might well have flagged this up, again it is not ultimately their responsibility to advise you on your tax affairs.

So no-one has misled you and no-one has lied to you, and you have nobody to blame except yourself for making assumptions and being in this position.

Just maybe i might have expected ACAS or more likely the Union solicitor who will have both had experience of COT3's to advise that I ought check my position.

Oh and thanks so much for the totally uncalled for and aggressive tone of your response. Let's hope you never get made redundant eh!;)

dampsquib

Whilst Jarndyce could have perhaps been more sympathetic, the tone of your original post was strong with references to being "mugged" and "screwed" etc. My experience is also that these arguements drag on and can get quite bitter before settlement is reached.

If you attempt to step back, and look at it from your employer's perspective for a moment, you can't expect them to point out the negative aspects of their offer, but that doesn't necessarily mean they are "mugging" you.
Also with ACAS, they are not qualified to say that an offer will be liable to tax, nor I suspect, would they want to throw a potential spanner into the works by suggesting that you check whether a payment will be liable to tax.
You could though have been better prepared by your union and/or their solicitor, so that the deduction of tax didn't come as a surprise. In my experience, it's always best to do some reserach of your own rather than just relying on others. I went down the same ET/COT3 road a few years back, and I did check out the tax postion should I receive extra cash via the ET or COT3. So my tax deduction didn't come as a surprise. Sorry but I think it's a case of "spilt milk" now.
Having said that, don't let the anger and the "tears" cause you to overlook checking the detail! If I were you, I would now check the detail of the deductions! When you received your first payment, did the tax deduction include any tax at higher rates? If it did, and as we are nearing the end of the tax year and your overall position for the year will soon be finalised, it would be prudent to check if you may have overpaid any tax?
You also mention that "around £1500" was deducted from your COT3 payment. 20% of £6000 is only £1200, so what was the other £300? Tax at higher rates, NIC, or a combination of the two? Again if it is higher rates, check if that will still be correct when the year is viewed as a whole? If NIC has been deducted, also check if that is correct. If any of the £6000 relates to more PILON, then NIC may indeed by due, but if the payment just adds to the termination compensation payment, I wouldn't expect NIC to be due on it.
Do some more checking! You never know, you might be able to get some of the £1500 back and reduce the damage.

METAL_MICKEY

Thanks dampsquib you do make some valid points. I will indeed check out the details on the tax.

I guess my emotive phrases such as "mugged" and "screwed" are perhaps indicatve of my bitterness about the whole saga. Redundancy is now part of many peoples lives but i guess all you can ever hope is that you are treated fairly and with due respect. I didn't get that hence the need to instigate an ET claim which i was desperately keen to avoid but they effectively backed a whole group of employees into a corner such as we had no option.

I guess the the whole tax issue at the death just felt like a final little cheeky "dig in the ribs" for me having the temerity to challenge the UK's largest outsourcer.

Thanks