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redundancy and date actually paid

redundancy and date actually paid

Hi all

Hoping someone can shed some light on a problem for a newbie!? :

If an individual has a compromise agreement as parf of their redundancy deal and its dated 4th April, if any payment for redundancy is made say around the 20th April, can the ex-employer just bring that payment into the 2011/12 tax year and adjust the P60 - claiming "it was processed in mth 12 therefore its in 2011/12"

I thought salary and such related payments were deteremined by a "paid" basis and you can't just allocate this based on when you "processed" payments

Does the Compromise agreement being dated beginning of April mean the ex-employer is bound to make the payment and therefore its "deemed" to made in 2011/12?




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By tom123
09th May 2012 07:16

For a director

The situation differs for Directors,

Employees are treated on a paid basis, but AFAIK directors pay is taxable at the earliest of when it is agreed or paid.

At least, that is the rule for bonuses, perhaps compromise agreements differ.

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09th May 2012 18:10

When the right to the paiyment arises

The rules for termination payments for directors and regular employees are the same. The rules referred to by tom123 only apply to a payment chargeable as earnings or benefits, but not to payments chargeable under s.401 ITEPA, i.e. payments in respect of termination etc.

Where s.401 applies the tax is triggered when payment is made. Payment is  made for tax purposes as soon as the receiving employee or director has a right to it.

The timing of the payment will therefore be whenever it was specified in the compromise agreement.

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