Redundancy or Termination by mutual agreement

UKSBD

My wife (non director but equal shareholder) has worked for our company for 12 years (contracted and on PAYE)

We were going to make her redundant by mutual consent, but after researching online I don't think this wouldn't be classed as redundancy.

I don't think it would be classed as a resignation either so would it be classed as Termination by mutual agreement?

Had the company made her redundant she would have been entitled to approx. £2,200 in statutory redundancy pay.

Can the company pay her this same amount as a mutual termination payment, and if so, is it treated the same way as redundancy pay for tax purposes?

sangie595

Try this for a start - http://www.masonbullock.co.uk/tax-on-settlement-agreements/
There's plenty more information on the internet if you look.

UKSBD

sangie595 wrote: »

Try this for a start - http://www.masonbullock.co.uk/tax-on-settlement-agreements/
There's plenty more information on the internet if you look.

Thanks, I had already seen that and lots of similar articles.
I know if the company does pay a settlement agreement it is tax free.


I am trying to find out if the company is allowed to pay a settlement/termination payment, and if so whether it can be the same as statutory redundancy?

UKSBD

I've found more info here http://www.acas.org.uk/index.aspx?articleid=4395

Judging by all the hassle you have to go through it will cost more to sort out than the tax saving we make by paying her anything.

Looks like we will just have to treat it as a resignation.

getmore4less

Would have to dig around but i believe hmrc have thing in place to stop using redundancy/severance payments to effectively pay wages tax free as the payment can be upto £30k.

Remember a settlement agreement legal stuff is to protect the employer you only need to satisfy HMRC to save tax otherwise you can do/pay what you like.

observations_from_a_hill

If the point of the exercise is to withdraw a few thousand pounds from the company with minimum deductions to your wife, ask your accountant if a share-buyback is permitted by your co.'s memo & articles. If so, she could sell all or part of her shareholding back to the co. without CGT liability (assuming no or only small capital gains made by her in the same financial year), no income tax, but probably a small cost in stamp duty.