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Redundancy Tax Question

(3 Posts)
CluckyKate Fri 14-Jan-11 14:04:29

Am hoping one of you clever ladies can answer this for me....

My role is being made redundant as part of a wider restructure - I've been through the consultation process and I'm definitely going so am now in the process of negotiating the settlement agreement.

I have just started maternity leave and the company are being very reasonable and have agreed to pay:
- Redundancy payment
- Payment in lieu of notice
- Maternity entitlement as a lump sum

So, onto my question:
My solicitor has suggested that the maternity entitlement covers my contractual notice period and therefore the payment in lieu of notice should be added to the redundancy payment therefore enabling me to take full advantage of £30k tax free entitlement. This would save me approx. £7k in tax. Would structuring the payment in this way be allowable by the IR?

Your thoughts and wisdom would be greatly appreaciated smile

LatteLady Mon 31-Jan-11 16:38:12

CK - is your maternity payment SMP or would your firm have paid you your full salary during this period?

If it is SMP then you will be taxed on the lump sum, however if it is them paying you during this time, you could ask for this be an ex-gratia payment which is covered as a £30k tax free sum entitlement.

Hope that this is not too late for you.

CluckyKate Wed 04-May-11 21:09:11

Thanks for the advice LatteLady.

Just thought I'd follow this up to let you know the outcome. It seems that my solicitor was right - mat pay (some of which is at the statutory minimum) does constitute PILON and the amount referred to as PILON was renamed and lumped in with the redundancy payment resulting in a fabulous tax saving.

So, this sorry situation (and it has been horrendous) has been rendered ever so slightly more palatable smile

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