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Readers’ forum: Redundancy or not?

30 November 2021
Issue: 4819 / Categories: Forum & Feedback
Factors affecting eligibility for a redundancy payment.

For about 30 years my client has been the director and sole shareholder of a limited company that imports and sells high-quality garments. Activity ceased during the pandemic although my client continued to draw a small salary from reserves. She has recently started to trade again but is wondering whether this would be a good time to stop work.

She has asked whether she could take some of the company’s cash reserves as a tax-free redundancy payment. My concern is that if the company simply stops trading my client would in effect be retiring and such a payment would be taxed as earnings.

If she could find a buyer for the company or its business would this support the redundancy argument and would it make any difference if she were made redundant before or after the sale?

I would appreciate any comments or advice...

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