Redundancy as Director

[Toon]

Has anyone succesfully claimed redundancy after your own business has gone into liquidation? Both my wife and I have been refused redundancy under the basis we weren't employees. However, we were both on the payroll and hadn't taken any dividends in over 3 years.

 

[ChrisCallaghan]

Hi @Toon

Several of my clients in the past have successfully claimed redundancy as directors following a liquidation. However, in recent years, the Redundancy Payments Service have made increasingly difficult for directors to successfully claim.

 

[Lisa Thomas]

Yes, but they have clamped down significantly lately. If you want to dm me I can give you the contact details for an expert who helps directors with their claims. There is the possibility of appeal. It might be too late as it's best to use an agent from scratch but always worth an initial chat.

 

[IanSuth]

Been there done that, didnt get the redundancy pay then BUT they then went after the company I was working at who had bought some of the business stating it was a TUPE transfer so other staff who didnt get a new role got paid out by them and when we were shut down by new owners in late lockdown I got the redundancy from them with continuous service back to start of oldco

The important thing seems to be that your pay was true pay for the role and not the minimum to use up tax allowances with the rest takes as dividends. They will look at hours vs pay vs Nat min wage

 

[Newchodge]

Has anyone succesfully claimed redundancy after your own business has gone into liquidation? Both my wife and I have been refused redundancy under the basis we weren't employees. However, we were both on the payroll and hadn't taken any dividends in over 3 years.

Were you both paid above National Minimum wage for all the hours you worked, or did you get paid the maximum available to avoid paying any tax or NI?

 

[UK Contractor Accountant]

A director, who is an office holder, can also be an employee and be eligible for payment.

Directors applying to the Insolvency Service for monies owed will need to provide evidence to support their claim that they were an employee.

The Insolvency Service will have to consider whether there was a contract of employment in place at the time (which can be express or implied).

Additional information will be asked for based on your circumstances and may include:

• the structure of the company in terms of directorships and shareholders
• the last 3 years’ P60s
• the last 3 months’ wage slips
• employer’s bank statements for the last 12 months to review regularity of payments
• a comparison of the contracted hours being claimed in relation to the work being undertaken
• whether the national minimum wage was paid
• a copy of the contract of employment and whether the terms of the contract were enacted
• dividends received in the last 3 years
• holiday pay arrangements
• workplace pension arrangements
• sick leave procedures
• grievance and disciplinary procedures

 

[Elliot Green]

Has anyone succesfully claimed redundancy after your own business has gone into liquidation? Both my wife and I have been refused redundancy under the basis we weren't employees. However, we were both on the payroll and hadn't taken any dividends in over 3 years.

This is a recent case in which a director appealed the rejection: https://www.oliverelliot.co.uk/2024/05/20/who-is-an-employee-director-on-insolvency/

 

[Toon]

Were you both paid above National Minimum wage for all the hours you worked, or did you get paid the maximum available to avoid paying any tax or NI?

I believe we both earned £10,400 a year.

 

[Toon]

A director, who is an office holder, can also be an employee and be eligible for payment.

Directors applying to the Insolvency Service for monies owed will need to provide evidence to support their claim that they were an employee.

The Insolvency Service will have to consider whether there was a contract of employment in place at the time (which can be express or implied).

Additional information will be asked for based on your circumstances and may include:

• the structure of the company in terms of directorships and shareholders
• the last 3 years’ P60s
• the last 3 months’ wage slips
• employer’s bank statements for the last 12 months to review regularity of payments
• a comparison of the contracted hours being claimed in relation to the work being undertaken
• whether the national minimum wage was paid
• a copy of the contract of employment and whether the terms of the contract were enacted
• dividends received in the last 3 years
• holiday pay arrangements
• workplace pension arrangements
• sick leave procedures
• grievance and disciplinary procedures

Got all of that apart from a physical contract!

 

[Toon]

This is a recent case in which a director appealed the rejection: https://www.oliverelliot.co.uk/2024/05/20/who-is-an-employee-director-on-insolvency/

Was your company involved in this or did you just report on it?

 

[Newchodge]

I believe we both earned £10,400 a year.

How many hours/week did you work?

 

[UK Contractor Accountant]

How many hours/week did you work?

cant possibly see how they were being paid more than minimum wage for that pay.

 

[Newchodge]

cant possibly see how they were being paid more than minimum wage for that pay.

No, I would suggest they were being paid a great deal less, so they were not employees, so there is no right to redundancy.

 

[Newchodge]

Got all of that apart from a physical contract!

I don't think you have the most important one - being paid at least national minimum wage for all hours worked.

 

[IanSuth]

cant possibly see how they were being paid more than minimum wage for that pay.

909 hours at min wage or 17.5 hrs a week

 

[Newchodge]

909 hours at min wage or 17.5 hrs a week

This would have been a couple of years ago, I think, when NMW was less.

 

[UK Contractor Accountant]

909 hours at min wage or 17.5 hrs a week

Is that for the cleaner

 

[IanSuth]

Is that for the cleaner

well most owner managers end up having to do that as well

I just took the £10,400 divided by the adult min wage to get the max hours to have been paid min wage for them all

 

[IanSuth]

This would have been a couple of years ago, I think, when NMW was less.

they may look at last year (redundancy pay is based upon earnings on last employed day) so 23-apr24 it was 10.42, that brings the calculation to 998 hours or 19hrs a week

 

[Toon]

How many hours/week did you work?

Averaged around 15 I'd say.

 

[Newchodge]

Averaged around 15 I'd say.

Well if you can convince HMRC of that you may have a chance. Not much of a chance, but if you want to try.

 

[Elliot Green]

Was your company involved in this or did you just report on it?

We reported.