View Full Version : Payments from work

23-08-16, 04:52
I was wondering if anyone could help me on this one , I've been finished at work through ill health ( not worked since February 2014) and was told that I would be entitled to 6 weeks notice in lieu and any holidays I had accrued and it would be paid at the end of July. I received an envelope off them on that day only to find a p45 with no payslips showing just my holiday pay in which no tax had been deducted. I phoned HR and explained what I had received and he said he would get back to me, which he did the following day and admitted it was payrolls mistake and it would be sorted out . This morning I received 2 payslips but no amended p45 , 1 payslip for my holiday pay (showing no tax deducted )the other for my 6 weeks pay in lieu ( which only goes in the bank on the 30th of August) and to my surprise I had been taxed considerably .
I phoned HMRC explained and asked for a tax refund because I haven't worked since February 2014 , the lady said that if my employer had paid both holiday and 6 weeks pay in lieu at the same time I wouldn't have paid any tax whatsoever . And to speak to my employer to see if they will reimburse me the tax payment, if not I will have to wait till the end of the tax year because I'm receiving contribution based esa which is taxable . I phoned HR but got no answer , so my point is ... should my employer reimburse me with the amount of tax I've paid seeing as it's their own big mistake and they haven't stood by what they said they would do and if not is there any type of action i could take against them seeing as I'm the one who has been penalised through no fault of my own and surely with the second half of the money I'm entitled to hasn't even been put in the bank as of yet . I would appreciate any help on this situation.
Many Thanks
Snowy 123

23-08-16, 10:26
Payments in lieu of notice and payment for holidays not taken are usually taxable.

(It is redundancy payments that are not taxable).

Payment in Lieu of Notice could either be tax free or taxed

It depends on whether or not your original contract of employment entitled you to a payment in lieu of notice. If your contract says that you are entitled to it, then payment in lieu of notice is a payment your employer is obliged to pay you. As such, it is not ex gratia and will be taxable.

If your contract does not provide for payment in lieu of notice, then both you and your employer will be free to negotiate whether or not you will have pay in lieu of notice, and therefore they are not obliged to pay you. As such, the payment is ex gratia for tax purposes, and will not be taxed (up to the £30,000 limit).

Payment for wages owed will be taxed

Because wages due to you are part of your earnings, and not really to do with your leaving, they will be taxed as usual.

Payment for holiday not taken will be taxed.

If you had taken the holiday, and got paid, then that payment would have been taxed in the normal way, and so it is still taxable when paid as part of a settlement agreement.

I'm guessing that what has happened here is that that second payslip is showing the tax that should have been taken from the holiday pay but wasn't, as well as 6 weeks payment in lieu, but with only one months (or one weeks?) tax allowance applied.

I think that in your shoes I would do a rough calculation as to whether the tax they have deducted seems about right for that scenario with holiday pay being taxed fully and a couple of weeks pay without any tax allowance.

If it is then I would leave it until the end of the tax year when you should get a (small) tax rebate.

It's always a pain working out the final payments after a termination like this; most people think that the company have got it wrong.
Sometimes they have, not on purpose but because, thankfully, it's an unusual situation for both sides.

23-08-16, 10:59
Hi nukecad, thanks for your reply , when I explained to the hmrc yesterday it was them who told me that if my employer would have paid me for both holiday's and my 6 weeks notice in lieu like they promised me they would , my original p45 would obviously have included both amounts and because it's the only pay I have received this tax year off work ,hmrc told me that I wouldn't have been liable to pay any tax just national insurance, but because they didn't pay me in that way they have obviously taxed me on my 6 weeks notice and I was advised to explain this to my employers to which I've tried to contact them in numerous way but up til now I can't get a response off them, and if they won't pay me the tax back (which hmrc told me that is OK for them to do that) then I will have to wait till the end of the tax year which in my opinion I don't think it's right because they have admitted it was the payroll department that made the mistake and i should have been paid both at the same time and has put me out of pocket , money that I could really do with seeing as I'm a single parent with 2 teenage children living with me full time

23-08-16, 12:11
Well I'm still not sure that the lady at HMRC was right, maybe she was thinking this was a redundancy payment?

There again you are correct in saying that if you have been paid some more after they had issued a P45 then they should issue a new P45 to supercede the old one. (It's awkward but it can be done).

You realy need to talk to you ex-employers and get a full explanation of just what they have done and why.
Ask for an explanation of their calculations.
Remember that there are rules (laws) that they have to follow in these situations, and if they don't get it right they could be liable for prosecution.
When you ask for explanations it may prompt them to actually check properly what they should have done.

And to be honest- I would rather wait a while for a tax rebate than get to the end of the year and find out I didn't pay enough tax and have to pay it off out of my benefit.

27-08-16, 06:58
Hi nukecad, after speaking to work and explaining things to them , they have sorted everything out and paid me all the money I was entitled to without paying any tax , so I got a good result in the end , I wasn't going to give in to them .

27-08-16, 07:38
Glad you got it sorted to your satisfaction.

Your contacting them again probably did prompt them to check carefully what they should actually have done.