Redundancy payment from the Insolvency Service

Assuming needs to go on the Tax Return, despite being less than £30K?

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Hi all,

Client received a redundancy payment from the Insolvency Service in the sum of £15K. Below £30K, so covered by the exemption, however am assuming it still needs to go on the Tax Return? (Got a bit of sudden brain freeze today).

Thanks.

Replies (11)

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By gillybean04
20th Dec 2021 17:23

Are you sure it's covered by the exemption? If it was, why would it need to go on the tax return?

Was the payment entirely for redunancy? Or was it for redundancy, wages, holiday pay, PILON and so forth?

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Replying to gillybean04:
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By Hugo Fair
20th Dec 2021 17:52

This deserves a variation on the usual response to VAT questions ... in this case (as it's not about VAT): "What was paid by whom for what?"
... but with a deal more precision in the answers.

Take a look at https://www.gov.uk/government/publications/redundancy-payments-from-the-... ... you may even find that the sum is after some Tax/NIC deductions!

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Replying to Hugo Fair:
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By Software Seeker
20th Dec 2021 18:55

Thanks. It was the statutory redundancy payment paid by the IS. Thanks for the link. No tax/NI deducted at source.

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Replying to gillybean04:
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By Software Seeker
20th Dec 2021 18:40

gillybean04 wrote:

Are you sure it's covered by the exemption? If it was, why would it need to go on the tax return?

Was the payment entirely for redunancy? Or was it for redundancy, wages, holiday pay, PILON and so forth?

Made up solely as a redundancy payment. No part for wages, holiday pay, PILON, etc. So yes am confident it is covered by the £30K threshold. I've always entered payments made directly by employers upto the £30K into box 9 page Ai2 (curiously described on the Return as the £30K "exemption" when we all know it's "threshold"), so was wondering about payments made by The Insolvency Service.

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Replying to Software Seeker:
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By Hugo Fair
20th Dec 2021 19:18

If you're sure about what it's for (and that there's no Tax already deducted), then why wouldn't you put it in the same box 9 page Ai2 that you've always used when the payment was "made directly by the employer"?
[I'm assuming you mean the section on page Ai2 headed "Share schemes and employment lump sums, compensation and deductions, certain post-employment income and patent royalty payments" - which is not concerned with who paid it].

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Replying to Hugo Fair:
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By Software Seeker
21st Dec 2021 09:52

Hugo Fair wrote:

If you're sure about what it's for (and that there's no Tax already deducted), then why wouldn't you put it in the same box 9 page Ai2 that you've always used when the payment was "made directly by the employer"?
[I'm assuming you mean the section on page Ai2 headed "Share schemes and employment lump sums, compensation and deductions, certain post-employment income and patent royalty payments" - which is not concerned with who paid it].

Yep, exactly, why wouldn't I? I shall. Thanks. (and your assumption is correct).

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Replying to Software Seeker:
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By gillybean04
20th Dec 2021 19:47

I suppose it might be asked for the purpose of those payments over £30,000 - to work out the taxable porition.

There are others who can provide more reliable and technical answers than me (I've still got so much to learn myself) but as I read it (ITEPA), it's not taxable under s62 as earnings unless s401 brings it under earnings, which it only does so if over £30,000. I'd also check s404.

There's the pragmatic/easy answer of checking what hmrc have. Easy might not always be right but in the circumstances, I'd say it's pragmatic.

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By Tax Dragon
20th Dec 2021 17:32

There is no such thing as "the exemption".

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Replying to Tax Dragon:
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By Software Seeker
20th Dec 2021 18:29

Thank you. Threshold.

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Replying to Software Seeker:
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By Tax Dragon
20th Dec 2021 18:37

The point (as gillybean and Hugo make) is that payments below £30k may be taxable, or taxable in part. The threshold applies only to amounts not otherwise taxable.

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Replying to Tax Dragon:
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By Software Seeker
20th Dec 2021 18:53

Yes, thank you. It was a statutory redundancy payment not paid by the insolvent employer.

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