Towards the end of November Philip Hammond delivered his first Autumn Statement as Chancellor.
This speech contained few measures that would directly affect the insolvency process, however following an in-depth assessment of the proposals outlined in the statement it has been revealed that from April 2018 businesses paying termination or redundancy payments to staff will potentially face a National Insurance bill for the first time.
The first £30,000 of a termination payment will remain exempt from Income Tax and National Insurance contributions under these new rules, but any amount over that will be taxed accordingly.
The legislation regarding termination payments also includes:
- making all contractual and non-contractual payments in lieu of notice (PILONs) taxable as earnings
- requiring employers to tax the equivalent of an employee’s basic pay if notice is not worked
- removing foreign service relief for employees who have spent time working outside of the UK.
This move is likely to affect businesses that are using redundancy as part of their business recovery or insolvency proceedings, especially where staff have been highly paid or have served a long time with the company and are therefore likely to receive larger termination payments.
Additional details regarding this new policy can be found here in the draft Finance Bill 2017.