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Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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There I am in a redundancy position. Payment in lieu of

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Hi There
I am in a redundancy position.
Payment in lieu of notice will be in the order of £39k plus a £7,600 stat redundancy payment.
There is no PILON clause on my contract.
My employer is suggesting that they make a £30k damages payment (which would be tax free) and the remaining £16.6k will be subject to tax and NI.
Does HMRC treat the £39k and £7,600 figures separately in terms of the £30k thresholds and therefore if treated as separate figures each gets a £30k tax free allowance or would HMRC just look at the entire amount?
Any help most appreciated.
Hi Thanks or your question I am Sam and I am on eof the UK tax experts here on Just Answer. You have only one £30k Exemption - so the facts would see £7600 paid tax free and the Pay in Lieu element taxable (so the £39K) So if the company can find a factual reason to pay you tax free compensation - then this would mean only £22,400 would be exempt. However I cannot see any legal way they can pay you this, as this does not represent the facts and its on those that the tax position must be applied and I am sure you can appreciate, I would be not doing my job proeprtly if I suggested ways to evade the tax due. Let me know if I can assist further ThanksSam
Customer: replied 1 year ago.
Hi SamWhen I say PILON in reality it is being treated as damages as there is no contractual provision in my contract for PILON.The total amount of 'damages' being paid is about £47k and they are advising that the first £30k would not incur tax.Does this alter your view in anyway?Many thanksAdam
Hi Its still liable to tax I am afraid whether there is provision within the contract or not - as its pay in lieu, which had it been worked and paid to you for work rendered, would still be treated within the remit of salary.So it all remains liable to tax - just the statutory redundancy will be tax free.They could legally increase the redundancy element up to £30,000 (so part statutory and part as per there generosity) as long as your employment contract doesn't specify ONLY statutory would be due but everything other than true compensation (say for bullying harassment etc) and redundancy (statutory or other) is treated as employment income, so salary, pay in lieu, bonuses, commissions, holiday pay, golden handshakes, etc Thanks Sam
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