Can a sole director/shareholder get redundancy pay

Compensation for loss of office & redundancy pay

Didn't find your answer?

All

Our client is the sole director and shareholder of his limited company. He has been unwell and has stopped trading through the company due to his health and hence would like to close the company. His director's current account is overdrawn and he would have to pay a high corporation tax liability when we submit his accounts. Unfortunately, he does not have the funds to pay the liaiblity due to his ill health.

We had been running a payroll for him for the past 2.5 years up to his personal allowances. I have read many different articles about redundancy pay and compensation for loss of office and whether HMRC would accept these types of claims for a sole director and shareholder. Unfortunately, I have found certain cases where HMRC have disputed the claims and other cases where they were accepted. I was also advised that as he has more than 5% shareholding and is the controlling director, he will be unable to get redundancy pay.

Has anyone ever come across a case like this? Can a sole director/shareholder of a business get redundancy pay and compensation for loss of office? (where the first £30,000 will be tax free).

Thanks for your help.

Replies (5)

Please login or register to join the discussion.

By stratty
02nd Nov 2017 16:16

Our of curiosity how do you expect the business to fund a redundancy/compensation payment if you believe it would be unable to pay corporation tax that is becoming due.

Thanks (0)
Replying to stratty:
Portia profile image
By Portia Nina Levin
02nd Nov 2017 16:36

It's going to reduce the overdrawn DCA, obviously.

Thanks (1)
Replying to Portia Nina Levin:
By stratty
02nd Nov 2017 17:48

Obviously. How silly of me.

Thanks (1)
avatar
By Accountant A
02nd Nov 2017 16:51

Is Anonymous now the default setting for questions?

Thanks (0)
avatar
By stephenkendrew
02nd Nov 2017 16:58

"Unfortunately, he does not have the funds to pay the liaiblity due to his ill health."

Wrong - the company doesn't have the money to pay the corporation tax because he's taken it!

Thanks (5)