Spring 2005 Newsletter Content Home Sweet Pension Anything To Declare? Death And Taxes His And Hers Oh, Gross! We Didn't Mean It Agassi Wins Time To Go It Could Be Worse... Trivial Pursuit Re: Mortgages A Marriage Made In... Time's Money Show Business Scam Of The Decade? Gift Aid Vat's Hot! Wait For It A Good Buy? Know Your Articles Rights And Wrongs

Time To Go It's well-known that when you leave a job, you can be paid a golden handshake of £30,000, and there's no tax on it. If you can wangle that, it almost seems worth losing your job for. But there are limits - the Revenue are always suspicious of tax-free money, and they often argue that it's not a 'proper' golden handshake. In one recent case, an employee was put on three months' 'gardening leave' - she wasn't to come to work, but she wasn't to work anywhere else either. She was paid three months' salary. The letter that sacked her was inconsistent - it described the payment as 'in lieu of notice', which is tax-free, but the terms of the gardening leave meant that it was effectively a payment for working the notice period (without any duties). The Revenue won the argument: she was being paid for restricting her work in accordance with her contract, and wasn't being paid purely because of the loss of the job. In another case, a couple transferred the business they had run together to their son. They decided that the son and the father would not get on, so they resigned from the company, and the company paid them £30,000 each, describing the payments as 'in appreciation of services to the company over many years'. The Revenue successfully argued that the payments were actually for those services, so they were part of salary and taxable, rather than to do with leaving the job. The main thing is not to expect something that you won't get - £30,000 tax free is, sadly, not an automatic right. But if you might get something on leaving a job, we will be pleased to advise you on what the tax consequences are likely to be, and whether it might be possible to improve them. The case about gardening leave is Redundant Employee v McNally SpC 00440. The Revenue's view is not surprising, and nor is the result. The main point of interest is the inconsistency in the letter, which said first "we are writing to confirm our decision to terminate your employment ... with effect from today", but then "under the terms of your contract you are entitled to 3 months contractual notice. During your notice period, you will not be required to attend the office, however you should ensure that you are available for work if required...". The Commissioners held that the second sentence was the one which actually reflected what was happening. The case on the transfer of business was Allum & Allum v Marsh SpC 446, in which the relevant board minute stated "Following the resignation due to retirement of Mr JW Allum and Mrs NE Allum it was agreed that an ex gratia payment of £30,000 each be made in appreciation of their services to the company over many years." It seems harsh that this fairly innocent wording should be used to tie the payments to the contractual services, but that was how the Commissioner saw it.