Any tax experts out there? PleaseHelp!

[runragged]

I recently started a thread "my dh is having a terrible time at work.." and he has received his final pay 3 months. My query is that on his payslip he has been paid in the gross column the severance pay net of tax which is then not taxed again.

But, I expected to see £5650 under amount worked, sick pay, holidays etc, but what actually appeared was £4340. So they had deducted 22% at source. Having queried this the answer I got was "it's right".

However I did work in payroll for a long time and have never come across this, severance pay is either taxed or not but always through the payroll, and any earnings "taxed at source" were things such as car allowance, and some expenses so that NI was not charged with special dispensation from the Inland revenue.

Would really appreciate any comments as don't want hime to be ripped off any further, thanks in advance

Runragged, sorry to hear that your dh's employers are still causing problems. How is the job hunting going? Has your dh regained some of his lost self confidence?

I am not a tax expert but may be able to throw some light on the situation from an employment law viewpoint.

I assume your dh was entitled to three months notice but it was decided to end his employment immediately - ie without giving him the three months notice. If the company had left it at that, your dh could have taken them to court for breach of contract and the court would have awarded him damages which would be based on his actual financial loss your dh suffered as a direct result of the company's failure to give notice. This amount would be his net pay as, even if the company had given him the proper notice, he would only have received his net pay.

So, what employers often do, is to pay out the sum which the employee would be awarded by the court without the hassle of the employee making a claim etc - this is what pay in lieu of notice is.

Of course, as the pay in lieu of notice is not normally subject to PAYE and NIC, most employers pay the gross amount (they still save on the employers' NIC). So what your dh's employer has done is probably legally acceptable, I would say that they have acted in a petty and smallminded way.

I know this won't really have helped your situation but at least it gives some sort of explanation of the reasoning behind the employer's actions-assuming, of course, that I have understood the situation correctly.

BTW, any outstanding holiday pay should have be fully taxed etc.

All the best to you and your dh.

great post, sis, and all the best to you, runragged (think that should be my nickname...)

Sis, thanks a lot. I totally agree that they are being small minded. DH was told it would be paid and taxed which I was annoyed about and couldn't understand it as it would cost them an extra 11% in eer NI contributions. But what they have done is paid him 78% of his 3 months salary (tax free)effectively deducting tax at their end not deducting NI from his money and so presumably not paying it themselves. I understood it that if PAYE was payable so was NI.

I don't even mind paying the tax but what I need to make sure of is that they haven't pulled a fast one and "kept" the other 22%! If we are going to lose the money then it should go to the tax man and not those theiving bds!

On the job hunt front, I was waiting for some good news before I posted again but there isn't any. He got down to the last 3 for one job and the last 2 for another. Both really tasty jobs. At the moment there is nothing more out there. But and I am going to start a thread on this after my assessment, I think I am going to train to be a driving instructor and he can be stay at home for a while - that's the current thought. Will be looking for comments before we make our final decision.

runragged - I think what's happening here is that because your DH's employers have effectively terminated his contract without notice, this technically constitutes a breach of contract and so any payment to him will be regarded by the Inland Revenue as damages for breach of contract, and therefore not subject to NI. There's more detail about it here .

Hi GillW and sis, thought I'd let you know what they have done as have finally got to the bottom of it. They have taken dh's normal net pay after any deductions, multiplied it out up to three months and then paid it tax free, and said there you go.
Obviously I am hopping as the company has paid 3 months but effectively saved itself £1500!!!!! Also this is total b***ks as NOONE deals with "net" pay I mean all sorts of things are included, tax, NI, pension, tax credits, csa payments. (Scuse my language.)
At least I am now in a position to dispute it, I don't even mind paying the tax to the inland revenue but those thieving gits are not going to keep it, I could be in for a long haul though.