Sort out tax matters when an employee leaves

Employment tribunal awards

An employment tribunal may tell you to pay money to a former employee under one of the three rulings listed below. Payments under any of these count as gross pay for income tax purposes:

• reinstatement or re-engagement order - the tribunal decides you sacked someone unfairly and orders you to give them back their job and pay them arrears of pay
• order for the continuation of employment - The tribunal orders you to continue to pay someone while their complaint of unfair dismissal is dealt with
• a protective award - a tribunal decides you have broken some rules in making a person redundant, and orders you to pay them for a set protected period

Tax should be worked out on the total figure awarded, even if it is only a small amount. You can get the exact figure from the clerk of the tribunal.

If you have the slightest doubt about what to do, get in touch with HM Revenue & Customs.

For further information download the employer's guide to PAYE and NICs from the HM Revenue & Customs website (PDF).

Subjects covered in this guide

• Introduction
• What forms you need to fill in
• Standard payments
• Statutory Maternity, Paternity and Adoption Pay
• Taking account of student loan repayments
• Redundancy payments
• Employment tribunal awards
• Lump sum and non-cash payments

 

 Print This Page

Source - Business Link; Crown Copyright.