§ Mr. Dover
asked the Secretary of State for Employment if payments made under the insolvency provisions of the Employment Protection (Consolidation) Act 1978 to compensate for insolvent employers' failure to give employees their minimum statutory notice will continue to be subject to notional tax.
§ Mr. Waddington
Yes. In these circumstances, my Department is required by the 1978 Act to pay the employee a sum equivalent to the damages a court would have awarded against the employer. A court would normally assess the employee's financial loss during the notice period net of the tax that would have been paid had the notice been worked. The reduction my Department makes for notional tax has the same effect in most cases, but I recognise that it may, in a very limited number of cases, overtax those who do not go on to earn enough in the tax year as a whole to cover their personal tax allowances. As a result a system of supplementary payments is being introduced to enable employees in this position who were dismissed on or after 5 April 1982 to reclaim notional tax from the redundancy fund at the end of the tax year. Details of the system are still under discussion, but employees who may be affected are being told that they may be able to make supplementary claims.