Re-engagement after Redundancy - tax advice needed

star88

Hi

Would you need to pay tax on the redundancy pay is you return to work for the same company after being made redundant, if so, how long do you need to leave it before returning before tax is incurred - would the same rules apply is you are employed as a contractor?

marlot

Local authorities insist on a month and a day. I don't know if there's any basis for this in law though, or whether it's a longer period if applying to the same LA.

patman99

I think the month+1 day gap is something to do with avoiding continuation of service (i.e. you worked for 6 years, got made redundant, went back 3 weeks later and worked a further 10 years, thus acruing 16 years for redundancy rather than 10). However, when I last looked it up, the gap to avoid 'continuation of service for redundancy purposes' was 12 weeks.

As for Tax. You will not need to pay any Tax on your redundancy pay-out as the amount you recieve as reward for service is a Tax-free sum. It matters not if you are offered another job within another dept in the same company once you finished your last day, or whether the offer is 6 months down the line.

anamenottaken

patman99 wrote: »

I think the month+1 day gap is something to do with avoiding continuation of service (i.e. you worked for 6 years, got made redundant, went back 3 weeks later and worked a further 10 years, thus acruing 16 years for redundancy rather than 10). However, when I last looked it up, the gap to avoid 'continuation of service for redundancy purposes' was 12 weeks. Where did you find that? Service is broken if there is an 8-day gap (to include 2 Saturdays).

As for Tax. You will not need to pay any Tax on your redundancy pay-out as the amount you recieve as reward for service is a Tax-free sum. It is important to say that a redundancy payment is definitely not a reward for service. If it was for service, it would be taxable. It matters not if you are offered another job within another dept in the same company once you finished your last day, or whether the offer is 6 months down the line.

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getmore4less

HMRC can investigate for contrived redundancies.

if it was this easy we would not be paying tax.

Just make everyone redundant with £30k and reemploy every so often.

The main question is why was this job not available as a suitable alternative at the time?

gallifreyseven

patman99 wrote: »

You will not need to pay any Tax on your redundancy pay-out as the amount you recieve as reward for service is a Tax-free sum.

Only the first £30,000 is Tax and NI free, anything over that attracts Tax as normal.

I know, I know...wishful thinking... :rotfl:

getmore4less

gallifreyseven wrote: »

Only the first £30,000 is Tax and NI free, anything over that attracts Tax and NI as normal.

I know, I know...wishful thinking... :rotfl:

There should not be NI on the surplus compensation.

http://www.hmrc.gov.uk/guidance/redundancy-factsheet.pdf

gallifreyseven

Whoops...guilty as charged. In my defence, I've been awake since 3am. :doh:

Post amended.