Quick question.

If redundancy and notice pay are paid by the government following a company
going into administration. Is the notice pay taxable?
Can't seem to find a definitive answer. I thought notice pay is taxed, but
a colleague has said he knows someone who was made redundant and had to
claim from the government and the notice pay was not taxed. Is this
correct?

Is this because the government caps redundancy and notice at £380 per week?

Thank you.



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"slider" wrote in message
...
Quick question.

If redundancy and notice pay are paid by the government following a
company going into administration. Is the notice pay taxable?
Can't seem to find a definitive answer. I thought notice pay is
taxed, but a colleague has said he knows someone who was made
redundant and had to claim from the government and the notice pay
was not taxed. Is this correct?

Is this because the government caps redundancy and notice at £380
per week?

Notice pay is taxable, although I think sometimes companies try to get
round it by saying it's agreed damages for breach of contract (ie
because they didn't give you your full notice).

--
Andy

Andy Pandy wrote:

Notice pay is taxable, although I think sometimes companies try to get
round it by saying it's agreed damages for breach of contract (ie
because they didn't give you your full notice).

I notice you said they "try to". Do they succeed? Is it legal?

One could argue, on the basis that the purpose of damages for breach is
to put you in the same position as if there had been no breach, that they
should pay you the income you lost out on, and that this should be taxed
in the usual way. One could also argue, on the same basis, that they
should simply pay you the net equivalent. Thus the employee is in the
same position he would have been in, but the cost to the employer is
reduced by the income tax and employee's NI and employer's NI.

However, your answer relates to the situation where the payment is made
by an employer, whereas the OP's question focused on that where it is
made by the government when the employer has run out of funds. Here again
the argument could go either way.

"Ronald Raygun" wrote in message
om...
Andy Pandy wrote:

Notice pay is taxable, although I think sometimes companies try to
get
round it by saying it's agreed damages for breach of contract (ie
because they didn't give you your full notice).

I notice you said they "try to". Do they succeed? Is it legal?

They used to (it used to be standard practice at my place) but I think
HMRC are clamping down on it.

--
Andy

"Andy Pandy" wrote in message
...

"Ronald Raygun" wrote in message
om...
Andy Pandy wrote:

Notice pay is taxable, although I think sometimes companies try to get
round it by saying it's agreed damages for breach of contract (ie
because they didn't give you your full notice).

I notice you said they "try to". Do they succeed? Is it legal?

They used to (it used to be standard practice at my place) but I think
HMRC are clamping down on it.

--
Andy


AIUI, whether PILN (aka PILON these days) is taxable depends on whether it's
a contractual entitlement (and custom and practice can establish that it is,
even if it's not written).

--
Martin

On Thu, 25 Feb 2010 12:31:08 GMT, Ronald Raygun
wrote:

Andy Pandy wrote:

Notice pay is taxable, although I think sometimes companies try to get
round it by saying it's agreed damages for breach of contract (ie
because they didn't give you your full notice).

I notice you said they "try to". Do they succeed? Is it legal?

One could argue, on the basis that the purpose of damages for breach is
to put you in the same position as if there had been no breach, that they
should pay you the income you lost out on, and that this should be taxed
in the usual way. One could also argue, on the same basis, that they
should simply pay you the net equivalent. Thus the employee is in the
same position he would have been in, but the cost to the employer is
reduced by the income tax and employee's NI and employer's NI.

However, your answer relates to the situation where the payment is made
by an employer, whereas the OP's question focused on that where it is
made by the government when the employer has run out of funds. Here again
the argument could go either way.

Damages is assesses after tax is taken into account.