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bigduckontax, Accountant
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I shall soon be made redundant and will revive a severance

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I shall soon be made redundant and will revive a severance package which I believe will be taxed at 40% on any sum above £30,000.
I have been informed that the tax office takes into consideration overseas work with the company where the company has paid the tax. The relief I believe is for a maximum of ten years which works out at a 10% reduction for each year, for example, there will be a 10% reduction on the 40% tax paid for up to 10 years, can this statement be confirmed
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Redundancy payments are tax free for the first 30K then at your marginal rate for the balance. Here is Taxation's advice on the effects of foreign service: 'Foreign serviceIf the employee has ‘foreign service’ (see definition below) he may be exempt from income tax on some or all of his compensation payment (see ITEPA 2003, s 413 to s 414). The payment will be exempt from income tax in its entirety if the employee’s foreign service comprises:75% of the total period of service to the termination date; orall of the previous 10 years, where the total period of service to the termination date exceeds 10 years; or50% of that period including any 10 of the previous 20 years, where the total period of service to the termination date exceeds 20 years.Where the exemption is not available the individual may make a claim for foreign service relief on that part of the compensation payment in excess of £30,000. The taxable amount above £30,000 is reduced pro rata depending on the proportion of the individual’s foreign service to his total period of service.In deciding whether foreign service exemption or relief applies, successive employments with different members of the same group of companies are treated as if they were a single continuing employment as long as the compensation payment takes account of that service (see EIM13975).Under current law, foreign service is broadly service when the individual was not both resident and ordinarily resident in the UK. From 6 April 2013 (subject to transitional rules), the proposed abolition of the concept of ordinary residence will mean that only the portion of a compensation payment which relates to a period of non-UK residency will be eligible for foreign service relief.' You may have misunderstood the situation from the tenor of your question, but the above extract explains the position fully. You can read the full article here: http://www.taxation.co.uk/taxation/Articles/2013/02/27/303301/taken-out If you do have taxable redundancy pay you can reduce your tax exposure by making contributions to a private pension scheme up to current limits. I do hope that you have found my reply of assistance.
Customer: replied 1 year ago.
I started to work overseas in Februay 2005 and returned back to the UK in August 2009 before returning overseas for the same company in October 2011 and will return in August 2017, following 8months of the redundancy process I shall be redundant in April 2018 at which point Irecive the redundancy package which will be around £150,000 of which currently the first 30,000 is tax free, the remainder will be taxed at 40%.
I have looked on the ITEPA website but cannot find anything that relates to s413 - s414, can you be more specific or provide the link to this information please
Expert:  bigduckontax replied 1 year ago.
From the data supplied you would appear to come into the 75% bracket, in which case the redundancy payment will be free of Income Tax. Your employer will be deducting tax so you will have to claim this back from HMRC which you can do either at the end of the tax year when you make your annual self assessment tax return or alternatively you can approach your tax office for a refund immediately after receipt of the payment. ITEPA is a mnemonic for the Income Tax (Earnings and Pensions) Act, 2003 which explains the lack of clarity on a web site!
Customer: replied 1 year ago.
Eric, sorry to be pedantic, the issue is not with ITEPA, you reference S 413 - S414, I cannot find anything in the documentation that identifies either the sections or paragraphs
Thanks
Expert:  bigduckontax replied 1 year ago.
Keith, actually, but not to worry; Eric was my Uncle, long deceased, died in a tent on a Scout Camp! ITEPA s. 413 you can find here: http://www.taxworld.co.uk/income-tax/itepa-2003/part-06-employment-income-income-which-is-not-earnings-or-share-related/chapter-03-payments-and-benefits-on-termination-of-employment-etc/section-413-exception-in-certain-cases-of-foreign-service/ s. 414: http://www.taxworld.co.uk/income-tax/itepa-2003/part-06-employment-income-income-which-is-not-earnings-or-share-related/chapter-03-payments-and-benefits-on-termination-of-employment-etc/section-414-reduction-in-other-cases-of-foreign-service/ Please be so kind as to rate me before you leave the Just Answer site.
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Customer: replied 1 year ago.
Keith, many thanks, ***** ***** the incorrect name, not sure what I. Was thinking of, regards Tony
Expert:  bigduckontax replied 1 year ago.
Thank you for your support. We all get these aberrations as we get older. I got so worried on one occasion that I consulted my GP. She went through a string of little paper tests and told me to push off! The men in white coats are coming for me next week!

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