Posted on: Wednesday 29th April, 2020
It’s not widely known, but as a limited company director you may be eligible to claim redundancy if your company enters liquidation. General awareness of director redundancy is still relatively low, but accountants are ideally placed to increase consciousness of this highly significant fact, especially when their director clients experience such extreme financial pressure on a personal and professional level.
It may help to know that, if you haven’t been advised of a potential redundancy claim by your accountant and feel they have been remiss in not telling you, you’re not alone. So what exactly are the criteria for making a redundancy claim as a director?
Essentially, to be eligible for redundancy pay as a director you must also be an employee of the company, working under an employment contract – preferably written, but oral and implied contracts may also be acceptable.
In addition to an employment contract, the criteria include:
Although a written contract is the ideal, oral and implied contracts may also be accepted if you can prove categorically that you’re an employee of the business – you receive a salary through PAYE and perform a practical role in the company, for example.
As we mentioned earlier, the ability of a director to claim redundancy pay when their company is liquidated isn’t widely known. It’s a common assumption that when a company enters liquidation directors have no such employment rights, but you may also be able to claim other statutory entitlements in addition to redundancy, such as holiday pay and arrears of salary.
Although accountants are well placed to advise directors on this situation many clients remain unaware, but claiming redundancy pay as a director is beneficial in a number of ways when the company enters liquidation. Redundancy pay could be used to fund the CVL, for example, or pay off some of the debt.
If your accountant has failed to inform you about the possibility of claiming redundancy, you may feel misadvised and let down. Furthermore, if you’re considering changing your accountant as a result, it can be difficult to find a trustworthy alternative.
It is possible to make the process easier using reliable referrals from companies that specialise in this area, however. Handpicked Accountants is one such company that provides trustworthy recommendations for accountants nationwide, making it much easier to find a good accountant in your area.
For more information tailored to your own situation, call our experts at Redundancy Claims UK. We specialise in helping directors maximise their claim for redundancy, and other payments to which they’re entitled. Please contact one of the team to arrange a free same-day consultation. RCUK are Authorised and Regulated by the Financial Conduct Authority. Authorisation No 830522. You can check our registration here.
Does accepting a new job offer before the date of redundancy prevent a director making a claim for redundancy to the RPS
If you are looking to close your limited company, you may have attempted to strike it off by submitting a DS01 form to Companies House. This process is also sometimes referred to as dissolving or company dissolution.
A Creditors’ Voluntary Liquidation (CVL) is an official procedure whereby a company’s assets are liquidated in order to pay creditors. It’s typically initiated by directors when their company becomes insolvent and there is no hope of business recovery.
May I take this opportunity to thank you and your team for all your professional help in securing for myself and my wife, redundancy pay. I would have no hesitation in recommending RCUK to assist them.Tom Harrison Managing Director of a construction company