Tax on severance pay

[Paymeoffplease]

Have namechanged for this as under confidentiality agreement.

Am being made redundant and have been offered compromise agreement to include my redundancy pay and payment in lieu of maternity pay as part of the package.

The total is within the threshold for tax of £30k.
However my employer has said that hmrc might still chase me for tax. ( am guessing they mean on the part relating to my mater ity pay)

Is this correct? How will they know what the payment relates to? Won't it just be a lump sum?

Thanks for any advice

Whether tax will be due depends on the terms of your contract and the terms of the compromise agreement. If they want you to sign a compromise agreement they should be paying for you to have a lawyer who can advise you on this - it is a very complex area.

You will only have to pay tax on the maternity element. Redundancy pay is non taxable as long as it remains under the £30k threshold.

Could you explain a little more about the maternity element as i'm not sure if what you're being offered is legitimate.

Thanks for your responses

I have offered a compromise agreement which includes an aggrrement to pay me what i would have been entitled to in terms of the remainder of my maternity pay in addition to the redundancy i am entitled to. They have called it severance pay.

I have been offered a figure which it is said will be tax free and they have explained the breakdown includes

Money in lieu of notice
Enhanced redundancy( including statutory redundancy
And 'x' pounds in respect of 15 weeks maternity

So are paying a fixed sum of 'x' in lieu of 15 weeks maternity within the overall lump sum.

Let me know if you need any more info

Oh and yes they have offered to pay a set fee towards having a lawyer confirm it's lawful etc

They may be referring to the fact that if it has become "customary" to offer the payment in lieu - then HMRC indeed may regard this as taxable.