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Redundancy and Directors

Can a husband and wife who both have employment contracts and work in a business which now has no work pay themselves redundancy and notice pay before they pay their creditors? If so can they pay the statutory rate or the minimum wage amount which is what they receive at the moment?

Any help would be appreciated.

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07th Sep 2011 15:27

In theory yes, however in practice no.

Since a director is an office holder of the company as well as an employee (assuming a contract of employment exists), then of course he / she can be made redundant and therefore would be subject to redundancy terms in the same way as any other employee.

If we were discussing a single director being made redundant by another director who would take over a consolidated role than it wouldn't necessarily be a problem.

Where problems arise is when the directors are effectively making themselves redundant with no-one taking over their roles. In this circumstance I would argue that the directors are creating a potentially artificial 'redundancy' situation in order to recieve preferential creditor status. This would seem to be the case regardless of the terms of the 'redundancy' payments made (statutory or enhanced).

I've had this raised previously in relation to owner managed businesses and the tax treatment around PILON payments.

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