When can I start my claim for enhanced redundancy?

[edc]

PILON is taxable. But, where no notice has been served or paid, there is a breach of contract and the treatment of this payment is different to PILON.

It is standard fare to have such a clause re indemnity in most compromise agreements. Certainly, I have it inserted for those I have worked on. Your adviser or solicitor should be advising you of this though.

[Roger645]

davek_964 said:

Roger645 said:

The compromise agreement offered PILON but at basic pay and not including other standard benefits. This was tax free as it was classed as damages as there is no provision for PILON in my contract. The compromise agreement also made me responsible for both parties liabilities should HMRC decide that there was in fact tax to be paid on the damages.

OK, but PILON is separate from redundancy pay. So even if they are trying to give PILON instead of worked notice I thought they would still have to offer redundancy on top of that - was that just statutory minimum?

Gov website says you can still be paid PILON even if it's not in your contract, which should be full pay plus compensation for benefits. And my understanding is, PILON is taxable - ours was.

Yes, it was statutory as well as the PILON, but the PILON was basic pay not including benefits as I am now getting on garden leave. The tax free element as I understand it is because it's paid as damages but the tax free allowance is capped at £30k.

[Roger645]

edc said:

PILON is taxable. But, where no notice has been served or paid, there is a breach of contract and the treatment of this payment is different to PILON.

It is standard fare to have such a clause re indemnity in most compromise agreements. Certainly, I have it inserted for those I have worked on. Your adviser or solicitor should be advising you of this though.

Did your clause make the employee indemnify the employer as well?

[Jasandjules]

Roger645 said:

Did your clause make the employee indemnify the employer as well?

You always have this clause removed as an employee. The employer has company accountants, it is their job to ensure the tax liability is clear.

[edc]

Roger645 said:

edc said:

PILON is taxable. But, where no notice has been served or paid, there is a breach of contract and the treatment of this payment is different to PILON.

It is standard fare to have such a clause re indemnity in most compromise agreements. Certainly, I have it inserted for those I have worked on. Your adviser or solicitor should be advising you of this though.

Did your clause make the employee indemnify the employer as well?

Yes indeed, as already mentioned. These agreements have been used in redundancy and non-redundancy situations.

[Roger645]

edc said:

Roger645 said:

edc said:

PILON is taxable. But, where no notice has been served or paid, there is a breach of contract and the treatment of this payment is different to PILON.

It is standard fare to have such a clause re indemnity in most compromise agreements. Certainly, I have it inserted for those I have worked on. Your adviser or solicitor should be advising you of this though.

Did your clause make the employee indemnify the employer as well?

Yes indeed, as already mentioned. These agreements have been used in redundancy and non-redundancy situations.

OK, I guess it's an individuals choice if they want to accept the risk. This wasn't the only reason I didn't accept the compromise agreement terms but was included in my decision.

[edc]

Roger645 said:

OK, I guess it's an individuals choice if they want to accept the risk. This wasn't the only reason I didn't accept the compromise agreement terms but was included in my decision.

Whilst the 'risk' might sit with you the Company will 99% of the time in good faith do the work that is necessary to ensure the payment is correct and proper. However, that doesn't stop HMRC wanting to have a look if they want to. Your own adviser/solicitor should be able to talk you through those risks, the way the payments are constructed etc and whilst not making the decision for you, can help to give you some confidence. I have not been in a business or a position where an agreement has been signed without that condition.

[Roger645]

edc said:

Roger645 said:

OK, I guess it's an individuals choice if they want to accept the risk. This wasn't the only reason I didn't accept the compromise agreement terms but was included in my decision.

Whilst the 'risk' might sit with you the Company will 99% of the time in good faith do the work that is necessary to ensure the payment is correct and proper. However, that doesn't stop HMRC wanting to have a look if they want to. Your own adviser/solicitor should be able to talk you through those risks, the way the payments are constructed etc and whilst not making the decision for you, can help to give you some confidence. I have not been in a business or a position where an agreement has been signed without that condition.

Based on the circumstances surrounding my situation and based on what else is in the agreement I am pretty sure that the only interest that the company had was its own mitigation of risks.

If the payment is correct and proper why do the company feel the need to get the employee to indemnify them against any any issue from HMRC, as has been pointed out the company has accountants to ensure that they are not exposed to the risk. Just to be clear, if someone accepts this clause and signs it's nor a case of the risk might sit with the individual, it does 100% sit with the individual.

[edc]

Roger645 said:

Based on the circumstances surrounding my situation and based on what else is in the agreement I am pretty sure that the only interest that the company had was its own mitigation of risks.

If the payment is correct and proper why do the company feel the need to get the employee to indemnify them against any any issue from HMRC, as has been pointed out the company has accountants to ensure that they are not exposed to the risk. Just to be clear, if someone accepts this clause and signs it's nor a case of the risk might sit with the individual, it does 100% sit with the individual.

I think you are missing my point. Your adviser can assess how risky that risk is, if that makes sense, and advise you accordingly. If their judgement is that the Company are pushing the boundaries of what is or isn't in scope of the relevant section (I think 401 and 403 ITEPA), then the real risk is obviously much higher. As you may know, it is not as simple as as any payment under £30k is payable tax free. As a business you are always going to want that clause in there.

Also, with reference to accountants, this is not really an accounting function. It is more a legal and taxation point, which for most businesses, they will not have that knowledge of internal to their business. I use, external tax lawyers for these things where necessary.

In your case, and as you describe, if it is a genuine redundancy situation and the payment is a simple statutory one, then the real risk is as close to zero as can be. As you have found out though that does not stop the company wanting that clause though!

Edit - Anyway, there is no right or wrong answer per se. I am just trying to show you the other side of the coin. Obviously, you feel hard done by and see the actions of the company in a different light.

Edited by edc on Thursday 2nd April 14:50

[Roger645]

edc said:

Roger645 said:

Based on the circumstances surrounding my situation and based on what else is in the agreement I am pretty sure that the only interest that the company had was its own mitigation of risks.

If the payment is correct and proper why do the company feel the need to get the employee to indemnify them against any any issue from HMRC, as has been pointed out the company has accountants to ensure that they are not exposed to the risk. Just to be clear, if someone accepts this clause and signs it's nor a case of the risk might sit with the individual, it does 100% sit with the individual.

I think you are missing my point. Your adviser can assess how risky that risk is, if that makes sense, and advise you accordingly. If their judgement is that the Company are pushing the boundaries of what is or isn't in scope of the relevant section (I think 401 and 403 ITEPA), then the real risk is obviously much higher. As you may know, it is not as simple as as any payment under £30k is payable tax free. As a business you are always going to want that clause in there.

Also, with reference to accountants, this is not really an accounting function. It is more a legal and taxation point, which for most businesses, they will not have that knowledge of internal to their business. I use, external tax lawyers for these things where necessary.

In your case, and as you describe, if it is a genuine redundancy situation and the payment is a simple statutory one, then the real risk is as close to zero as can be. As you have found out though that does not stop the company wanting that clause though!

I think the point, from my point of view as opposed to the companies that this clause and others in the agreement (based on advice) made the agreement unacceptable and therefore I didn't sign it and am pursuing matters via another avenue.

[edc]

That's fair enough. Only you (and your adviser and company) are privy to it's contents so good luck!