Ex-Gratia payment

Good morning, One of our employees contract has been terminated and a company has decided to pay her £45,000 ex-gratia & £14,500 notice pay. I understand that the ex-gratia up to £30,000 is tax free. To save tax & NIC, she wants to contribute all of her notice pay £14,500 & £15,000 of her ex gratia payment out of £45,000 into a salary scarifies pension scheme as an additional voluntary contribution, is it possible or allowed, please advise?

Hi ,
 

HMRC doesnt recognise the term Ex-Gratia as this can be used as a catch all for various different types of payment. These types of payments can be treated differently in legislation so we would require more details of what this payment is made up of. It may be that it is still exempt under the £30,000 rule however we would need more information. With regards to the salary sacrafice question if the individual gives up all rights to this money and then the business makes an employer contritbution then this is fine, however you may wish to contact the pension provider to ensure this is ok to do. Thank you .

The whole £45,000 is the enhanced redundancy pay, please advise?

Hi,
Please refer to the Non statutory clearance team. Complete annex A and then they will advise on the tax treatment of the payment:
Find out about the Non-Statutory Clearance Service
Thank you.