Redundancy for wife: we're both IT contractors with our own Co.

Hi folks,

Myself and my wife are both directors of my company, we are both IT contactors, my wife has just finished maternity leave and wont be working again for the company so i want to pay her redundancy. I belive i can pay her up to 13K in redundancy payment, is this correct?

Also, i recently took profit from the company of around 13K and paid tax at 41% on this. Would it be possible to reverse this payment and use the 13K to pay redundancy and claim the tax back thats already paid? So use the 13K profit as the redundancy payment or is it too late?

X.

Re: Redundancy

xabi said:

Myself and my wife are both directors of my company, we are both IT contactors, my wife has just finished maternity leave and wont be working again for the company so i want to pay her redundancy. I belive i can pay her up to 13K in redundancy payment, is this correct?

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Where does the €13K figure come from? I would have thought that you could pay her whatever you liked but some or all of it could be assessable for tax etc. Have you asked your accountant for advice and guidance?

Re: Redundancy

I think the 13K is the tax free amount that i can pay her.

Re: Redundancy

Doesn't that depend on what her earnings have been to date, how long she has been working etc.?

Re: Redundancy

xabi said:

i recently took profit from the company of around 13K and paid tax at 42% on this.

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You mean 41% presumably?

Re: Redundancy

ClubMan said:

You mean 41% presumably?

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Yes.

Re: Redundancy

ClubMan said:

Doesn't that depend on what her earnings have been to date, how long she has been working etc.?

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This was the figure given to me by my accountant, im not sure if it was derived from her earnings etc or a set amount that can be taken.

I havent asked the acountant about the 2nd question yet regarding the profit that was already taken.

Re: Redundancy

If your year-end accounts run from Jan-Dec then I would imagine you can simply balance out the tax payments over the remaining 6 months of the year.

In other words, you've just paid €5,330 (41% of €13k) tax to Revenue. So, if you just keep paying yourself every month as normal, but just state €0 on your P30 until such time as it balances itself out. At the end of the year just make sure the total tax paid is enough based on the salary you have taken overall.

Re: Redundancy

It was actually 22K bonus that i took and the net was around 13K, so i paid about 9K in tax. I currently pay tax monthly by DD and paid a lump sum of 9K when i took the bonus. So if im saying the 13K was a redundancy payment i can cliam back the 9K next year, is there anything illegal about saying the 13K is now a redundancy payment as opposed to profit (salary).

X.