Redundancy Tax Question

[CluckyKate]

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 appreciated

If payment in lieu of notice (PILON) is NOT in your contract, then it isn't taxed anyway. Its only if the PILON is contractual, then its considered for tax purposes.

I should imagine for what your solicitor suggests to work, AND if your PILON is contractual, the company would have to give the payment a different name, maybe lump it into the redundancy payment.

Someone else may have other suggestions, but I used to work in payroll, and have been involved in redundancy machinations before (the company I worked for issued new contracts removing the entitlement to PILON, prior to making staff redundant, thus enabling it to be made tax free!)

Thanks MyrrhyBS

PILON is contractual so I think you're right with your second suggestion. This is what I've proposed to the company and they seem somewhat confused by this and are currently refusing to co-operate so I just wanted to make sure what I'm asking for is legit.