Mr Barry McCrindle v Represented by: Ms M Gribbon - Solicitor The Secretary of State for Business, Energy — 2020

The claim was determined on agreed facts and written submissions. Mr Barry McCrindle had obtained an earlier Employment Tribunal award including a basic award of £4,785 for unfair dismissal. After his former employer became insolvent and a liquidator was appointed on 4 February 2019, he sought payment from the Secretary of State under the insolvency provisions of the ERA 1996. The respondent paid £3,656.02 and deducted £1,128.98 for tax and national insurance, which was the only issue in dispute.

The tribunal set out the relevant provisions of Part XII of the ERA 1996, including s.184(1)(d), and the taxation provisions in ITEPA 2003, including ss.401 to 403. It accepted that a basic award is not earnings derived from employment and is not a payment to which the limited statutory redundancy exemptions in s.309 of ITEPA 2003 directly apply. The tribunal considered instead whether the basic award was a payment received directly or indirectly in consequence of or otherwise in connection with the termination of employment within s.401 ITEPA 2003, with the £30,000 threshold in s.403.

The tribunal found that the basic award fell within s.401 because it was an amount paid in connection with termination of employment, and that it was not a sum related to or derived from earnings or income. It concluded that, where an employer has become insolvent and the Secretary of State pays a basic award ordered by the Employment Tribunal, the payment must be made without deduction of tax and national insurance. The claim therefore succeeded, and the respondent was ordered to pay the deducted sum of £1,128.98.