Contract Advice - Self Employed or Limited Company?

[malvolio]

...I wouldn't worry about being taxed on the redundancy pay - there's been a two month break, and presumably the contract isn't open-ended, i.e. you'll reach a point where you're not working for that company?

Bzzztt.

I would. From memory it's at least into the end of the next tax year, may be longer. Be certain before you get slapped with a punitive tax bill.

[deeniguy]

Assuming you want to go back...

If your ex-employer is happy, go self employed/sole-trader. Just phone the tax office and tell them you're self employed. You declare your income on your tax return (don't forget to put the tax aside!)

You pay less NI than a brolly (but more than if you were outside IR35 ltd - but it looks very unlikely that you could argue that you were outside IR35).

I wouldn't worry about being taxed on the redundancy pay - there's been a two month break, and presumably the contract isn't open-ended, i.e. you'll reach a point where you're not working for that company?


If they want/need you, push for a bit more than £200. Go in at £250 - if you don't ask, you don't get.

As others have said, your safest bet is to get a job elsewhere. However, if that's proving difficult (and I'm guessing if you've been out of work for 2 months you've been looking) then if I were you I'd take it, self-employed, and not worry too much.

I only want to work for a few months and may leave before the contract ends or simply work the 6 months period. The company realised it made a mistake by letting some of us go, but my role is pretty much the same, the working hours change as we used to do shift work and i'm covering nights only as an engineer. The company is in desperate need and need me to join on Monday and have offered the contract. I'll try to bargain more than the £200/day offered.

My only real concern is the tax on my redundancy payment. I don't really want to go back to my lawyer that i used for my compromise agreement and i understand that i could potentially sue, but the company is happy to take me back and need me and i also need a job for financial reasons. How likely is it that the revenue will come after me? Is it rare?

[TheFaQQer]

My only real concern is the tax on my redundancy payment. I don't really want to go back to my lawyer that i used for my compromise agreement and i understand that i could potentially sue, but the company is happy to take me back and need me and i also need a job for financial reasons. How likely is it that the revenue will come after me? Is it rare?

Legally, you need to pay tax on the redundancy payment, since you weren't made redundant.

Whether you want to commit tax fraud (and discuss it on the Internet) is a matter for you to decide.

[MadDawg]

Legally, you need to pay tax on the redundancy payment, since you weren't made redundant.

Whether you want to commit tax fraud (and discuss it on the Internet) is a matter for you to decide.

Are you sure?

Can an employee who is re-employed after having been made redundant retain his or her statutory redundancy pay? | Redundancy rights | Termination of employment | Frequently Asked HR Questions (FAQ) & Answers | XpertHR (bolding mine)

An employee who is re-employed after having been made redundant can retain his or her statutory redundancy payment, whether or not he or she is immediately re-employed or returns to work for the same employer at a later date. However, under s.214 of the Employment Rights Act 1996, the receipt of the redundancy payment will break the employee’s continuity of employment for the purposes of the statutory redundancy pay scheme. Therefore, if the employee is made redundant again in the future, he or she will not be entitled to a statutory redundancy payment until he or she has accrued another two years’ service. The statutory redundancy pay calculation will be based on the latter period of service only.
An employer should be cautious if there is no break in employment between termination on the grounds of redundancy and the employee recommencing work. This may cast doubt over the genuineness of the redundancy and may cause HM Revenue and Customs to question the tax-free status of the redundancy payment. The employer should therefore ensure that it can demonstrate that the redundancy was genuine.

[LisaContractorUmbrella]

I only want to work for a few months and may leave before the contract ends or simply work the 6 months period. The company realised it made a mistake by letting some of us go, but my role is pretty much the same, the working hours change as we used to do shift work and i'm covering nights only as an engineer. The company is in desperate need and need me to join on Monday and have offered the contract. I'll try to bargain more than the £200/day offered.

My only real concern is the tax on my redundancy payment. I don't really want to go back to my lawyer that i used for my compromise agreement and i understand that i could potentially sue, but the company is happy to take me back and need me and i also need a job for financial reasons. How likely is it that the revenue will come after me? Is it rare?

So the company made you redundant when the job wasn't actually redundant, then hired you back at a rate that would save them money and presumably you had to pay for the lawyer that put together the compromise agreement - you wan't to keep working with them why???

[MadDawg]

Give ACAS a ring - they'll be able to advise and probably know what they're talking about.

Acas - Home

[deeniguy]

So the company made you redundant when the job wasn't actually redundant, then hired you back at a rate that would save them money and presumably you had to pay for the lawyer that put together the compromise agreement - you wan't to keep working with them why???

We got a provisional redundancy notice and had a consultation period where we had meetings to discuss the redundancy. We were expecting a final redundancy letter, but we were advised to go for a compromise and the company will pay for the solicitor fees. So we did it this way and left after the compromise.

My company acquired another company which had better techs but after 2 months they've realised they made a mistake by letting us go as we had valuable experience. Now they want us back, but most of us have moved onto other jobs. I on the other hand need one urgently so don't mind going back for a few months. The job is not entirely the same, some tasks are similar but my duties will change compared to the old job and my working hours are different as before i used to work shift hours.

[deeniguy]

Legally, you need to pay tax on the redundancy payment, since you weren't made redundant.

Whether you want to commit tax fraud (and discuss it on the Internet) is a matter for you to decide.

It was a genuine redundancy process but now that the company has realised it has made loss of clients and has impacted the business as a whole, they require our services again and its all documented i'm pretty sure. I don't see why i would be liable to pay for tax on the redundancy payment. I'm not sure where the issue of tax fraud comes into this, that's mindboggling

[TheFaQQer]

It was a genuine redundancy process but now that the company has realised it has made loss of clients and has impacted the business as a whole, they require our services again and its all documented i'm pretty sure. I don't see why i would be liable to pay for tax on the redundancy payment. I'm not sure where the issue of tax fraud comes into this, that's mindboggling

If you are confident, then ring the HMRC helpline and ask them whether you need to pay tax on it or not.

Or ring the PCG legal helpline and see what they say (assuming you are a PCG member).

[deeniguy]

If you are confident, then ring the HMRC helpline and ask them whether you need to pay tax on it or not.

Or ring the PCG legal helpline and see what they say (assuming you are a PCG member).

Thanks. So i spoke to a senior advisor from HMRC who advised that if its a genuine redundancy which in my case it is, then it is unlikely that they'll ask to pay tax on my redundancy payment. On the other hand, she did say that if my employer wants me to register as a self employed contractor, then there will most certainly not be any reason to tax me on that redundancy payment and will just have to pay my tax by Jan 2015.