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2017-02-10T00:00:00+00:00

What are a director’s statutory entitlements in liquidation?

What are a director’s statutory entitlements in liquidation?

Most people are aware that employees have an entitlement to redundancy pay if the company they are working for closes down. However what is less widely understood is that directors are also eligible to claim redundancy pay if their company ceases trading due to financial pressures, such as HMRC or other debts, and subsequently enters liquidation.

If your company has been trading for over two years and is facing the prospect of having to close its doors for good as a result of insolvency, there is a good chance you will be eligible to make a claim for redundancy pay. Redundancy payments are made by the Redundancy Payments Service (RPS) which is funded through National Insurance contributions.

The amount you may be entitled to depends on several factors including how long the company has been incorporated, your age, and the salary you have been taking. Any statutory redundancy payment you receive will be tax-free and exempt from National Insurance. In addition to redundancy pay, it's possible that you can claim for other statutory entitlements such as notice pay, holiday pay and unpaid wages; these additional entitlements will be subject to tax and National Insurance deductions.

In order to claim redundancy pay, you will need to be able to prove your status as an employee within the company. This is usually done through a written employment contract. If the director does not have a written contract yet has regularly taken a salary through the PAYE scheme and worked regular hours, it is usually assumed that they are an employee. However when there is not a written employment contract, claiming redundancy can be a tricky process so you should seek expert advice if you are in any doubt as to your eligibility.

At what can be an extremely stressful time dealing with the loss of your company and consequently your livelihood, a redundancy claim can be vital in helping you get back on your feet and begin planning for the future.

If your company has already been liquidated, you may still be able to put in a valid claim, although time is very much of the essence. Your claim should be submitted typically within six months of the liquidation taking place, although this may be extended to 12 months in some cases.

If you wish to know more about claiming director redundancy and other statutory entitlements, Handpicked Accountants can put you in touch with a specialist adviser who will be able to guide you through the entire process.

David Tattersall
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