Redundancy payments to staff when closing one's company?

[wattaj]

which is also the point I'm making, i.e. if the company is forced to close as a result of events not under its control, are the directors entitled to redundancy payments? Note that the quoted case was in the EAT, so case law was set.

There are a range of conflicting opinions across the interweb on this point. I guess that one takes one's chances should it come to this.

[DaveB]

which is also the point I'm making, i.e. if the company is forced to close as a result of events not under its control, are the directors entitled to redundancy payments? Note that the quoted case was in the EAT, so case law was set.

That would be harder to argue since the company is not being forced to closed, it can still take on business direct where IR35 would not apply, however until that happens the cash flow impact of deemed payments makes keeping on staff untenable.

If it got to the point where closure due to lack of business was triggering insolvency then general opinion seems to be that you can claim statutory redundancy provided you can prove you had a contract of employment, written or oral, and had been employed for more than two years. This would then be overseen by the Insolvency practitioner dealing with the company and you would be treated as a preferential creditor. What you would not be able to do was make an arbitrary payment in compensation above the statutory amount as you would with a normal employee being made redundant.

How Does Redundancy Pay Work For Company Directors? | Clarke Bell
Directors: Making yourself redundant? By Nichola Ross Martin | AccountingWEB
A guide to redundancy pay for directors | The Gazette

[JohntheBike]

There are a range of conflicting opinions across the interweb on this point. I guess that one takes one's chances should it come to this.

well, I guess chance would not come into it. If no redundancies are paid prior to company closure, it would by necessity be debated at company closure time. So HMRC may or may not allow it at that time. However, if there would be a possibility of determining the issue in court, then HMRC are likely to concede.

[JohntheBike]

That would be harder to argue since the company is not being forced to closed, it can still take on business direct where IR35 would not apply, however until that happens the cash flow impact of deemed payments makes keeping on staff untenable.

If it got to the point where closure due to lack of business was triggering insolvency then general opinion seems to be that you can claim statutory redundancy provided you can prove you had a contract of employment, written or oral, and had been employed for more than two years. This would then be overseen by the Insolvency practitioner dealing with the company and you would be treated as a preferential creditor. What you would not be able to do was make an arbitrary payment in compensation above the statutory amount as you would with a normal employee being made redundant.

How Does Redundancy Pay Work For Company Directors? | Clarke Bell
Directors: Making yourself redundant? By Nichola Ross Martin | AccountingWEB
A guide to redundancy pay for directors | The Gazette

yes, agreed. But see my subsequent post. A little "persuasion" might encourage HMRC to allow the payment, at least to the non fee earning director.

"If the company director can prove to the liquidator that they had a practical and ongoing role in the running of the company, took a salary using the PAYE scheme and had a similar relationship to the company as other employees, they may be eligible for statutory payments."

In my case, and I guess in that of many others, I and my wife have paid PAYE and NI from the outset, over 23 years, and in recent years MyCo has also paid the minimum wage. We don't have written contracts, but verbal contracts. However, the issues will only become clear as and when I'm obliged to close the company. Just to clarify, I'm talking about MyCo paying the redundancies and having such payments offset against corporation tax and not claiming any payments from the state.