Termination payments

Question 1

What are some of the things we need to consider if we have been told there was termination payments.

Answer 1

The first thing we would want to be mindful of is that only 3 times the statutory payments will be eligible for tax relief - so in this context if we have made an ex gratia payment and this exceed the statutory payments then it will not be trade deductible

We also need to consider if there have been any post employment notice payments (PENP) - this would be applicable if payments were being made to the employee while they have finished working (i.e. they would be asked to leave) - if so they would need to be captured under employment income and would also use up our £30k allowance we have / if they continued to work their notice period then it would not need to be considered to be a PENP

Finally we need to think about this £30k limit, the first £30k of ex gratia payments will be exempt from class 1a NICs - with any amounts on top of this being subject Class 1a NICs - as noted previously, any amounts which are paid PENP will use up this allowance