The tax position on redundancy type payments can be very complex, as we have mentioned before, and it is an area that many employers need assistance with when making individual payments or when a larger company re-organisation is taking place.

Getting the tax right on payments made to a departing employee is absolutely crucial given that it is an area that has been in the top two on HMRC's PAYE "hit-list" consistently for many years with many employers continuing to be stung by large settlements when HMRC uncover errors - the majority of which stem from the common misconception that the £30k tax exemption for termination payments applies in all cases. It doesn't !

 

What support can Optimum PAYE provide ?

We commonly provide support to employers and other advisors in the following ways:

  • Providing adhoc tax technical advice by telephone or email as and when needed (this is mostly in relation to one-off payments or situations)
  • Support with compromise agreements:
    • Input in drawing up the agreement (often working alongside the employment lawyer) to ensure all tax issues are appropriately considered and to minimise tax liabilities and exposures
    • Reviewing the finalised agreement, along with other contractual documents, to identify and advise on the tax technical position and employer tax reporting responsibilities
  • Advising on, or drafting, redundancy policies to maximise tax efficiencies for future payments
  • Risk review of termination payment procedures and policies - to identify any potential risk areas and opportunities for the employer with current procedures and to advise on improvements to be made going forward
  • Support with mass redundancy programmes:
    • Planning stage - to help the employer avoid potential tax pitfalls and to maximise potential tax efficiencies
    • Implementation stage - reviewing or preparing employee communication material to ensure continued compliance with the tax planning strategy
    • HMRC agreement - obtaining "pre-transaction clearance" from HMRC on the tax position of the payments to be made
  • HMRC audit support:
    • Assisting with HMRC enquiries following an audit or review of termination payments
    • Settlement negotiations with HMRC including any potential penalty charges
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