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Termination payments: the basic rules relating to tax treatment, their common pitfalls and potential planning opportunities
KEY POINTS
- Do not assume that the £30 000 exemption applies to any termination payment.
- Any analysis of the component parts is important.
- A review of common pitfalls where tax and NIC apply.
- Suggestions of some common planning opportunities.
- Payment into a pension scheme may be advantageous.
The tax treatment of termination payments is an issue that advisers encounter regularly. An employer may seek help in various scenarios such as a large-scale redundancy programme the dismissal of a poorly performing employee the retirement of a long-serving employee or an employer-compliance review where HMRC have questioned the tax treatment of previous termination payments.
Alternatively an employee may want advice on their termination package. A reminder of the main tax issues when dealing with this type of query...
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