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Question 5b

Bex has recently left employment and entered into a business partnership with Amy. Bex requires advice in respect of a loan to the partnership, the calculation of her share of profits and the tax treatment of her redundancy payment.

Bex:
– Is resident and domiciled in the UK.
– Received an annual salary of £120,000 from her former employer, Cape Ltd.
– Was made redundant by Cape Ltd on 30 September 2015.
– Joined Amy, a sole trader, to form a partnership on 1 January 2016.
– Has no other source of income.

Bex – redundancy package from Cape Ltd:
– The package comprised a £22,000 statutory redundancy payment and an additional ex-gratia payment of £48,000.
– Bex also received three months’ salary in lieu of notice, as specified in her contract of employment.

Required:
(b) Explain the income tax implications for Bex of the receipt of the redundancy package from Cape Ltd and calculate her total income tax liability for the tax year 2015/16. (6 marks)