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Old 28.10.2020, 15:01
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UK tax free redundancy payout

Hi

My wife is in the process of registering under family reunification on my L permit and is working from home (In Switzerland) for her UK employer.

She is being made redundant from her UK job and receives the first £ 19k tax free as per UK taxation rules.

I've been told that this will have to be declared on her Swiss tax return and she will get taxed here on the full amount. Also she may have to pay a further 12% to cover social security contributions as her employer has no presence in Switzerland.

Does this sound correct? Can anybody provide any advice on this ?

Many thanks in advance
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Old 28.10.2020, 15:21
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Re: UK tax free redundancy payout

Does her employer have a UK or Swiss address for her on file? Is she employed as an employee or external contractor?

If the Swiss tax authorities recognise the payment as "Entschädigung" for loss of employment (severance) then taxes-only are likely due here from the date of registration/grant of permit, subject to the usual tax free allowance on a part-year basis. (In the same way her UK tax liability will be calculable on a part-year basis on UK departure).

Other deductions are usually only due on habitual salary payments that are pensionable so subject to NI in UK, and AHV, ALV etc here, again dependent on the employment relationship type (employee, contractor etc)

Has she already applied for the Permit meaning she has already declared that she lives here and is no longer resident anywhere else including the UK?

Given the tax and other consequences of declaring a change in residency to the authorities here, why not search for a specialist Treuhand for professional advice given the amounts involved?

Last edited by magyir; 28.10.2020 at 15:34. Reason: clarity
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Old 28.10.2020, 15:44
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Re: UK tax free redundancy payout

Hi,

Thanks for the response

Her employer is aware that she is working from home in Switzerland but has no Swiss address on file. She is a salaried employee for a UK based employer.

At the moment she is not registered in Switzerland but we are about to do that now (as she also can't have healthcare without being a resident)

Her employment ends in March 2021 so that is when the redundancy payment will be made.

I think we probably do need some professional advice!
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Old 28.10.2020, 16:02
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Re: UK tax free redundancy payout

I thought the UK redundancy tax free amount was higher but I think it's irrelevant. It seems you're assuming the non-tax-free amounts will have no tax liability in Switzerland. This can be an expensive assumption.

She's probably liable for Swiss tax on her UK earnings from the time she's resident here and would likely need to apply to the UK for UK tax relief on the money she's earned (and probably already paid tax on). Whether there would be Swiss social security to pay on this I don't know.
As someone already noted gnerally social security is not applied to redundancy payments.


If she/you don't need to submit a Swiss tax declaration you can do nothing and hope no-one asks. Also if you do have to then in the first tax year in Switzerland you can forget various things and hope no-one checks.
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Old 28.10.2020, 16:34
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Re: UK tax free redundancy payout

Hi,

I believe the redundancy payment will be taxed here and i was just wondering if anyone could offer any advice before i speak with a tax speacialist.

If she earns less than 120k and does not need to do a tax return would i have to include her income on my tax return?
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Old 28.10.2020, 20:06
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Re: UK tax free redundancy payout

Married couples are taxed as unit. You file a joint return.
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Old 29.10.2020, 11:40
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Re: UK tax free redundancy payout

I can't answer your question directly, but I can say under the double taxation treaty between Switzerland and the UK, if she is taxed in the UK she can offset this against any tax liability in Switzerland - if there is one.
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Old 29.10.2020, 11:58
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Re: UK tax free redundancy payout

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I can't answer your question directly, but I can say under the double taxation treaty between Switzerland and the UK, if she is taxed in the UK she can offset this against any tax liability in Switzerland - if there is one.
There is no tax liability in the UK for the first £30,000 of redundancy payments, it depends if they accept that it's 'taxable' in the UK @ 0% tax band.
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