Tax on redundancy

Green_Glass

Hi - I'm a long time reader on these forums and am grateful to all the help and advice everyone gives each other.

I am also after some advice, please I know the answer, really, but I suppose I am after confirmation that there is nothing I can do about it or if it is worth a fight.

I have just been made redundant due to closure of our part of the business. All 11 of us are being made redundant and redundancy will start on 1st December. We have been informed what our redundancy payment will be. It is statutory minimum, but most people have been there a long while, so the 12 weeks notice is a decent amount. Contractual notice period is one month, but I have been there 14 years.

It turns out that only my contact contains a PILON clause and therefore I must pay tax my notice.

Of the others, some joined before me and some after me yet none of the others have this clause in their contract. We all do the same role, and have done since we all joined, and only 1 person has a managerial role compared to the rest of us who are all at the same level, so I am at a loss to know why my contract has this and no-one else's does. ( I am the only female, but I don't believe that has anything to do with it)

Do I just have to like it or lump it or should I be asking the company or HMRC to review it ?

(it is getting to the point where the pitying looks of everyone around me is getting me down a bit - I think it seems a little unfair, but my colleagues seem more angry about it than I am )

Scorpio33

I am confused.


I always thought that the redundancy payments was always on top of your PILON? So any "redundancy" is tax free (up to £30k), with the PILON on top of this, taxed as normal.

Green_Glass

Scorpio33 wrote: »

I am confused.


I always thought that the redundancy payments was always on top of your PILON? So any "redundancy" is tax free (up to £30k), with the PILON on top of this, taxed as normal.

No - any payment in lieu of notice is tax free ( assuming that you don't work it) unless you have a clause in your contract that says that your employer can pay you in lieu of notice. Then it becomes taxable. I am the only one who has this in their contract

McKneff

Green_Glass wrote: »

No - any payment in lieu of notice is tax free ( assuming that you don't work it) unless you have a clause in your contract that says that your employer can pay you in lieu of notice. Then it becomes taxable. I am the only one who has this in their contract

You have this the wrong way around my friend.

purdyoaten

McKneff wrote: »

You have this the wrong way around my friend.

Are you sure? I think you may have misread the post?

Green_Glass

McKneff wrote: »

You have this the wrong way around my friend.

I wish that I did - but the lawyer that is handling our redundancy ( and research I have done on line) seems to say that having a clause in your contract that says you can be paid in lieu of notice means that it will be taxed.

I can't link, being a newbie, but if you could show me a link that says this clause means that you won't be taxed, I'd be very grateful. Thanks for your response

BargainJunky

Years ago I was paid in lieu of notice and paid no tax. The Financial Director said I could either leave immediately or work my notice - if I worked the notice it would be taxed but if I left that day it would be tax free - you can guess what I did.

A very good friend in a senior position in a payroll department said then and would say the same today that pay in lieu of notice is taxable but a lot of companies 'get it wrong'.

General_Grant

Tax in lieu of notice is indeed taxable if it is contractual. And it doesn't have to be written in order to be contractual. "Custom & Practice" - meaning if the company would normally pay PILON can be contractual even if it is not written in an individual's contract.

Those whom the OP thinks are looking on her in a pitying way may find that HMRC will be looking for tax on their PILON too.

Green_Glass

General_Grant wrote: »

Tax in lieu of notice is indeed taxable if it is contractual. And it doesn't have to be written in order to be contractual. "Custom & Practice" - meaning if the company would normally pay PILON can be contractual even if it is not written in an individual's contract.

Those whom the OP thinks are looking on her in a pitying way may find that HMRC will be looking for tax on their PILON too.

Thanks General Grant

That is my worry - if I start anything with HMRC, the more likely outcome would be that my colleagues would be taxed, rather than me not be taxed.

I shall just have to accept it.

weatherlobe

A concern I worked for part time became Insolvent all of a sudden and the Insolvency Service not only taxed but deducted full National Insurance from all payments except redundancy

chrisbur

If of any interest the employers guide has a chart on page 77 regarding termination payments....
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/356762/140922_CWG2__2014__09_14_revised_helpbook.pdf