Redundancy

[Manutd6591]

My redundancy package states I have to pay tax and national Insurance contributions on my retention payment, which is a loyalty payment for staying with the company until closure date, I believe you have to pay tax,but not national Insurance, is that correct?

[jaguarsuk]

My redundancy package states I have to pay tax and national Insurance contributions on my retention payment, which is a loyalty payment for staying with the company until closure date, I believe you have to pay tax,but not national Insurance, is that correct?

As a Man United fan you have to pay double tax and double national insurance.

In all seriousness it's not something I'd know, but Ula is good with employment matters.

Good luck

[ULA]

The issue will be how HMRC views the retention payment. For it not to qualify for NI deductions then it would have to be proven that this payment was a real element of compensating you for the consequences of you not being able to continue to earn a living from your employment with the company making you redundant.

Effectively you are being given a retention payment to incentivise you to continue working until the closing date rather than leave to take up a new job should you find one before this date. This does not seem to fit into the definition above and therefore it would seem that the company is correct in deducting NI from this payment.

[Manutd6591]

As a Man United fan you have to pay double tax and double national insurance.

In all seriousness it's not something I'd know, but Ula is good with employment matters.

Good luck

That was a hilarious reply,made me laugh big time

[Manutd6591]

Thanks so much for your answer, I could understand the 2nd paragraph,but the first paragraph confused me a bit,unless I’m reading it wrong, it appears to contradict the 2nd paragraph, could you explain it in a different way please.

[ULA]

Sorry to have confused you.

In order for the retention payment not to have NI deducted the HMRC would have to be satisfied that the retention payment is compensating you for the loss of your job due to redundancy. The elements of a redundancy payment, which together constitute the redundancy package, and therefore not subject to NI deductions could include:

Pay in lieu of notice (PILON) which may be more than the statutory minimum
Compensation for loss of pension rights
A general sum on account of loss of employment which may, or may not, be more than the statutory minimum

My view is that the retention payment is not compensating you for the loss of your job, it is an incentive for you to continue working until the closing date therefore would not fall under the above examples and as a consequence is subject to NI deductions.

Hope this is a better explanation.

[Manutd6591]

Thank you so much,I understand all of that information and thanks for your patience It all makes sense now and you’ve helped myself and a lot of my work colleagues.