LTD lost the biggest client. Thinking of staff cuts.

[mudskipper]

Confused - if you have an employment contract, don't you need to pay yourself NMW? That's a fair bit more than 10K a year...

I was going to say that even if redundancy is allowable, I doubt that, on NMW, you could justify a £30K redundancy payment to the tax man - the most generous package I've seen IRL is a month's salary for every year worked, but a week's is more typical.

[garnet]

Confused - if you have an employment contract, don't you need to pay yourself NMW? That's a fair bit more than 10K a year...

I was going to say that even if redundancy is allowable, I doubt that, on NMW, you could justify a £30K redundancy payment to the tax man - the most generous package I've seen IRL is a month's salary for every year worked, but a week's is more typical.

Yes, I do pay myself NMW as expected.
The redundancy payment will be less than £30 000, just put this figure because this is what is tax free maximum for RP.
The figures for the RP you cited are just the statutory RP rates (from gov.uk)

Length of service is capped at 20 years and weekly pay is capped at £464. The maximum amount of statutory redundancy pay is £13,920.

You can give your staff extra redundancy pay if you want to, or have a qualifying period of less than 2 years.

so more is not a problem. The problem is if this whole scheme will attract attention from the HMRC.
It seems it is not 100% known which way would this go.

[malvolio]

It seems it is not 100% known which way would this go.

Yes it is. The challenge is not because you are a director, but because your role is not actually redundant since the company continues to trade in the same line of work. Secondly, redundancy has to be involuntary which is tricky if you are the one making the decision to make yourself redundant. Plus of course you remain a shareholder in the company and so fall outside the statutory redundancy provisions anyway.

Still it's your call. Get it wrong and you get done for tax evasion...

[TykeMerc]

Yes it is. The challenge is not because you are a director, but because your role is not actually redundant since the company continues to trade in the same line of work. Secondly, redundancy has to be involuntary which is tricky if you are the one making the decision to make yourself redundant. Plus of course you remain a shareholder in the company and so fall outside the statutory redundancy provisions anyway.

Still it's your call. Get it wrong and you get done for tax evasion...

Exactly.

If garnet's wizard wheeze was a sensible (or even remotely viable) approach to being on the bench then it would be in common use, it would be an obvious tax avoidance strategy for someone planning to close TheirCo Ltd too.

[Craig at Nixon Williams]

Agree with what others have already been saying. Since you have a controlling share in the company, making yourself redundant is essentially the same as choosing to leave the employment – any payment made would therefore not qualify as being tax-free.

Instead accountants focus on number and balance sheets rather then focusing on devising schemes to make people redundant.

The role of an accountant (in addition to balance sheets etc.) is to give advice on how to comply with the law and minimise taxes legitimately – if you want one that can create schemes to make income appear as something else that is not taxable, see the EBT threads on these boards.

[blacjac]

Hi all,

employee of the above LTD earning £10 000 per year.

Yes, I have contract of employment

Aren't you breaking minimum wage laws there (assuming you work more than 29.5 hours a week...)??

[Jack Kada]

Agree with what others have already been saying. Since you have a controlling share in the company, making yourself redundant is essentially the same as choosing to leave the employment – any payment made would therefore not qualify as being tax-free.



The role of an accountant (in addition to balance sheets etc.) is to give advice on how to comply with the law and minimise taxes legitimately – if you want one that can create schemes to make income appear as something else that is not taxable, see the EBT threads on these boards.

So if the wife was the director and you a shareholder then would this proposition have legs?

The concensus here seems to be that because you are a director of a company any redunancy is not involuntary. If your wife was the director and she made you redundnat then could that be a way to achieve the outcome that the OP was interested in?>

You can see the difference of opinion and the court of appeals ruling shows that no accountant could give a definitive answer to this and when faced with a contentious issue will normally say no to avoid any possible claim on their indemnity insurance

[malvolio]

So if the wife was the director and you a shareholder then would this proposition have legs?

The concensus here seems to be that because you are a director of a company any redunancy is not involuntary. If your wife was the director and she made you redundnat then could that be a way to achieve the outcome that the OP was interested in?>

You can see the difference of opinion and the court of appeals ruling shows that no accountant could give a definitive answer to this and when faced with a contentious issue will normally say no to avoid any possible claim on their indemnity insurance

Before you poke too many sticks at the Accountancy profession, perhaps do some research on the Ramsay principle...

[Maslins]

The role of an accountant (in addition to balance sheets etc.) is to give advice on how to comply with the law and minimise taxes legitimately – if you want one that can create schemes to make income appear as something else that is not taxable, see the EBT threads on these boards.

Spot on.

[Jack Kada]

Before you poke too many sticks at the Accountancy profession, perhaps do some research on the Ramsay principle...

Thanks - Very interesting and informative ...

Learnt something new today