Breech of Contract

Debt_Free_Dreamer

I received a job offer and signed the contract. The job offer was then withdrawn.

I have been offered 4 weeks pay as compensation. However, the Comany state it will be subject to tax and national insurance.

I view the payment as a breech of contract payment and think it should not be subject to PAYE. Anyone know anything about this? I have searched the web, but I cannot find the answer.

I just want to avoid paying the tax man!

Thank you.

Conor_3

Yes it is subject to PAYE as it is "pay in lieu". You would have to pay the tax man even if it were a breach of contract payment as you're thinking of as it would still be taxable income. In fact pretty much any income other than second hand stuff you sell privately and gifts to a certain amount are taxable.

brightonman123

take the money, taxed or otherwise- didnt have to earn it, so see it as a bonus!

jobbingmusician

I don't know the answer to this question, but think it would be worth a trip to a CAB or even an hour with an employment lawyer (negotiate the fee first - some alledgedly give a consultation hour at a reasonable rate) to find out.

My logic is that redundancy payments are not taxable below quite a high threshold (used to be £35k) so this payment might fall into the same category.

I also think that a month's salary is not very generous, as except with quite low grade jobs it is likely to take you more than a month to find another post....

Debt_Free_Dreamer

Thanks everyone.

I'm still not convinced it is taxable. The Payroll Manager at my current place of work thinks it isn't either, so I am going to keep on searching or figure out a way to avoid paying it!

dmg24

Why ask a question when you are going to ignore the answers anyway?

It is not a redundancy payment, it is payment in lieu of notice. As Conor has already stated, this would be taxable.

The alternative would be for the company to have you start work, then ask you to leave as soon as you arrive. This is in effect what they are doing, without putting you to the inconvenience.

tigtag02

Debt_Free_Dreamer wrote: »

Thanks everyone.

I'm still not convinced it is taxable. The Payroll Manager at my current place of work thinks it isn't either, so I am going to keep on searching or figure out a way to avoid paying it!

I would be quite concerned that a Payroll Manager thinks this :eek:

Conor & dmg are correct and brightonman makes a VERY good point.

Debt_Free_Dreamer

Conor wrote: »

Yes it is subject to PAYE as it is "pay in lieu". You would have to pay the tax man even if it were a breach of contract payment as you're thinking of as it would still be taxable income. In fact pretty much any income other than second hand stuff you sell privately and gifts to a certain amount are taxable.

Conor - It is not a PILON as my contract states one weeks notice. They are paying one months salary. I am also not an employee. My contract will never get to start (and therefore never finish – in the true sense of PILON). So I don't think it falls into this tax category.

Debt_Free_Dreamer

brightonman123 wrote: »

take the money, taxed or otherwise- didnt have to earn it, so see it as a bonus!

Brightonman123 – I don’t want to just take the money and get taxed. I’m into tax avoidance as much as possible. I once persuaded my employer to increase my budget for a weeks stay in a posh hotel by getting them to pay the bill and recover the VAT and by taking two days unpaid leave so that they saved my full salary but I only lost the value after tax and NI. Once they paid my travel I came out even.

Oddly enough I am an Accountant, just don't do PAYE! Plus I don't think this is a PAYE issue.

Debt_Free_Dreamer

dmg24 wrote: »

Why ask a question when you are going to ignore the answers anyway?

It is not a redundancy payment, it is payment in lieu of notice. As Conor has already stated, this would be taxable.

The alternative would be for the company to have you start work, then ask you to leave as soon as you arrive. This is in effect what they are doing, without putting you to the inconvenience.

Dmg24 - Yep, your right they could have let me start and then told me to leave, but they didn’t, which makes trying to find an answer on the Customs and Excise web site so hard. I will not have been an employee and therefore I cannot see how this is a PILON payment. In a nutshell they have stopped my contract before it even started.

The only reference I can find to this situation are on legal websites as "payments for damages". This is usually to cover your losses whilst you are out of work following you losing a new job and having left your old job.

Debt_Free_Dreamer

tigtag02 wrote: »

I would be quite concerned that a Payroll Manager thinks this :eek:

Conor & dmg are correct and brightonman makes a VERY good point.

Tigtag – My Payroll Manager works for a large local authority organisation and is actually very knowledgeable. I do trust his opinion. After all the best accountants are the one’s who a good at tax avoidance. :j