It is always disappointing to hear news of redundancies, but sadly the likes of Reuters and Barclays have announced some fairly major cutbacks of late. One slightly nicer side to severance packages is some of the tax breaks which can be available to employees.
We find that employers and individuals are generally aware of the £30k exemption for most discretionary arrangements, but find that “foreign service relief” is frequently overlooked in the process. Those who are in a severence situation will inevitably be interested to understand the full financial implications, and the income tax and National Insurance position of course feeds into this.
In short, foreign service relief (FSR) can apply where an employee has performed duties overseas in his employment and such duties were not in the scope of UK tax (typically because the person was either a non-UK resident, or not ordinarily resident in the UK). If so all or part of a severance payment could be exempted from UK tax under FSR provisions.
If you are affected by a redundancy process, we would be happy arrange a no obligation consultation to determine whether you might be entitled to any relief from taxation. Please contact us to speak to one of our advisers in this regard.