Public sector cuts and redundancy payments

Public sector cuts and redundancy payments

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A friend has recently informed me that after 20+ years of service the MOD are making her redundant, Additionally she has been informed that there will be no allowance for the redundancy payment relief of £30,000 in her final salary payment This means she will need to claim the relief seperately. Is this legal? Can she claim it immediately or does she have to wait until the end of the tax year and process it through a self assessment? Is she entitled to interest payments from HMRC is they drag out the repayment process?

Paul

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Euan's picture
By Euan MacLennan
06th Jul 2011 09:39

One thing at a time

She is not entitled to any particular tax relief on her final salary payment or on any accrued holiday pay.

She will be entitled to receive her statutory redundancy payment free of tax, as it will be less than £30,000.

She may be entitled to the balance of the tax-free £30,000 against any other payments on the termination of her employment, provided that:

they are ex gratia and not her right under her contract of employment andthey are not part of the MOD's normal practice on redundancies to the point where they are effectively an implied part of her contract of employment.

If the MOD gives no tax relief on the non-statutory part of her termination payment and she is entitled to it, it is legal for her to ask for the relief by completing a tax return.

Assuming that she is entitled to the tax relief, there is very little prospect of HMRC paying interest on the tax relief which the MOD should have allowed in the first place.

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