Tribunal determines that redundancy payment is taxable
The tax tribunal recently had cause to consider the tax status of a redundancy payment which was determined to be subject to tax.
The taxpayer entered into an agreement with Hays to work at Merrill Lynch for a specific period. He was to be treated as working under a contract with Hays, and was not an employee of Merrill Lynch.
Hays operated PAYE on his earnings. The taxpayer however claimed he was employed by Merrill Lynch, from which he was made redundant and paid £30,000. He argued therefore that the payment should be tax free.
HMRC said that the taxpayer was employed by Hays, that the lump sum was a bonus paid in accordance with his contract and was fully taxable.
The First-tier Tribunal found that the taxpayer was employed by Hays at the relevant time and could not therefore have been made ‘redundant’ by Merrill Lynch. The taxpayer had a fixed term contract which provided for a bonus of £30,000 in specific circumstances. This was duly paid and was liable to tax.