Ex-gratia payment has been taxed

[beingbulliedatwork]

I've posted before about being bullied at work. It got really bad and I raised a grievance.

Then I got fired....

The letter stated that I would have my contract terminated immediately. and I would get payment in lieu of notice (1 month) and then on top of that there would be an ex-gratia payment worth 2 months wages.

Payslip received, and they've paid me basic months wages as normal, and then added the ex gratia payment as in lieu of notice, and have paid tax on all of it.

As an aside, one of the bully bitches, does Payroll

Anyone know if they have found a loophole or are they just trying their luck?

Thanks.

www.gov.uk/government/news/new-rules-for-taxation-of-termination-payments

Best way is to call your tax office, to be honest.

Thanks for the link, I'm reading up on lots right now

The only bit I can find is this: The element that is now chargeable to Income Tax and NICs is the amount of the termination payment that represents payment in lieu of notice (PILON).

The termination payment for lieu of notice only represents 1 month. All solicitor site say ex gratia payments are tax free.

What does your settlement agreement say about the payment?

Ultimately, you can claim the tax back via a tax return if they don’t budge

I didn't have a settlement agreement as I was there only 18 months (they were going to do one and then realised I hadn't been there 2 years).

I have a letter that says 'we are required by contract to give you a month's pay in lieu of notice, and in addition to this, we have agreed with the governors an ex gratia payment of two months wages'

What they've done in put the lieu of notice through as normal wages/basic pay, and they've put the ex gratia payment through as lieu of notice, so have been taxed on all of it.

I would call the tax office. They are pretty good at sorting stuff out.

I would imagine it's quite hard for the company to pay you, other than through payroll or maybe they should have marked it as an exempt payment somehow.

What was the ex gratia payment supposed to be for?

I guess the ex gratia payment of two months wages could have meant 'net wages' which is what you have received?

Ex gratia payment was because I had been bullied, and they didn't want the school being brought into disrepute. They wanted me to leave quietly. I didn't have any choice, they just terminated my employment, and said that they pay one month lieu of notice, and an ex gratia payment of two months.

It could have been malicious or it could have been a genuine mistake, if they used the wrong codes / flags for the payment in the payroll system then it would naturally charge the tax according to how the payments were classified.

HMRC are not going to adjust an employers RTI submission mid year in the say so of an employee. So I would start by asking your employer if they can correct the payroll entry, as it is possible you will be taxed incorrectly on your next job too, if you work again this tax year.

If that fails you would need to deal with this with an end of year tax return.

I've written to the Bursar. hopefully he can help.

It could be a mistake, but I was waiting for something like this to be honest. Not unexpected.

She prides herself on her payroll and employment law knowledge.

The equivalent of your notice pay should be taxed, so should any accrued holiday pay. But a genuine non salary payment made in connection with the termination of employment should not.

If they’ve lumped in your holiday pay with the ex gratia then they would have to pay tax and you’d have to claim back the excess... it’s very lazy of them though!

I agree Mrs pink, I've got my notice pay, and holiday pay taxed (as they should be), but they've lumped the ex gratia in as notice pay. Ex gratia is non contractual and not taxed (up to 30k...)