redundancy payment

**Captain Dispensable** · 27 April 2007, 09:59

Interesting if possible. Surely your accountant would know more than us on this subject, particularly how it relates to your particular circumstances!

Here's an interesting article detailing 10 ways of extracting money from a limited company, with your suggestion being included in "Option 10: Termination Payments"

http://www.taxationweb.co.uk/busines...cle.php?id=172

Let us know how you get on.

**pickle** · 27 April 2007, 10:52

Originally posted by Captain Dispensable

Interesting if possible. Surely your accountant would know more than us on this subject, particularly how it relates to your particular circumstances!

Here's an interesting article detailing 10 ways of extracting money from a limited company, with your suggestion being included in "Option 10: Termination Payments"

http://www.taxationweb.co.uk/busines...cle.php?id=172

Let us know how you get on.

A fair point. My accountant is more used to dealing with traditional company wide-ups. ie companies that employ people, rather than an owner managed one man band. He thinks that as I have closed down one company, taken the capital gains and started another, claiming redundancy would be not be looked very kindly on should the IR investigate. However, he is happy to put the charge through if Im happy to take the risk.

Hence im doing a bit of research before deciding. Its work about 6k/7k in tax savings to take the 30k out this way. Not a massive amount, but worth spending a few grey cells considering.

**VectraMan** · 27 April 2007, 11:00

Surely the normal redundancy rules apply - i.e. no more work for the person being made redundant. Presumably you're starting up your new company to do exactly the same thing, and I can't believe you'd get away with that.

**Sockpuppet** · 27 April 2007, 11:02

If your starting a new company then TUPE rules would apply and technically you couldn't make yourself redundant.

Depends if you are changing contract etc at the same time and if the new company could really be classed as "seperate".

**ASB** · 27 April 2007, 11:17

pickle,

No idea if this helps but the advice I received was:-

A payment to me in excess of the statutory redudancy amounts will come under close scrutiny. It would be unlikely to pass unless the business was carrying on without me. The risk becomes that it would be charged to income tax and NI. Again it was "do it if you want, but it could be expensive".

Remaining funds were to come out as a capital payment anyway. By the time I'd worked out the various options I felt I was better off paying the limited CGT rather than risk it.

**IR35 Avoider** · 27 April 2007, 11:40

This issue has often been raised before, and the conclusion was a one-man company couldn't do it. Unfortunately I can't remember the reason. One suggestion I've found is that it isn't allowed for Director and Company Secretary because they aren't employees.

I think one of the earlier posters might have been on the right track though. Tax-free redundancy is not available whenever a company sacks someone; it is only allowed when the company is forced to eliminate a position, because (for example) it is restructuring, or its sales have shrunk, etc. Unless your company is being forced to quit the contracting trade because of some external event, I'm guessing you wouldn't qualify.

**pickle** · 27 April 2007, 12:26

Originally posted by ASB

pickle,

No idea if this helps but the advice I received was:-

A payment to me in excess of the statutory redudancy amounts will come under close scrutiny. It would be unlikely to pass unless the business was carrying on without me. The risk becomes that it would be charged to income tax and NI. Again it was "do it if you want, but it could be expensive".

Remaining funds were to come out as a capital payment anyway. By the time I'd worked out the various options I felt I was better off paying the limited CGT rather than risk it.

Thanks, it does help. Statatory redundancy would be about 7 years pay. Or about 700 quid, hardly worth as it will come out as capital gain with taper relief anyway. Serves me right for being a low pay/high divi cowboy

**VectraMan** · 27 April 2007, 13:33

Originally posted by pickle

Thanks, it does help. Statatory redundancy would be about 7 years pay. Or about 700 quid

You only earn £700 in 7 years?

No wonder you're shutting down your company.

**pickle** · 27 April 2007, 13:40

Originally posted by VectraMan

You only earn £700 in 7 years?

No wonder you're shutting down your company.

oops, I of course mean 7 weeks.....

redundancy payment