Tax On Pilon

roysterer

I am due to be made redundant, I will receive 3 Months (13 Weeks) PILON as part of my redundancy. This part of my redundancy payment will be taxed and the remainder will be tax free.
Question is :- as the inland revenue tax rules changed in the last couple of years, because on previous redundancies at my company the PILON payment as always been tax free?

Thanks

Pete111

It depends. Previously when companies paid pilon they could get away with paying it untaxed if there was no PILON provision in the employees contract. This is due to the PILON being a breach of contract (in a contract with No PILON provision) albeit one that benefits the employee, rather than a given term and condition

Most companies do have this in their contracts however which means it can/should be taxed. In addition more recently the IR has taken to enforcing taxation on PILON payments where no contrractual clause exists if the company has developed a habit of making PILON payments previously - basically saying PILON has effectively become a company policy and is therefore a taxable term of employment, even though it is not in employee contracts

- Check tour contract, if it does not contain a PILON clause you could try to argue the case but I would reckon the company would rather pay this after tax (and avoid future liability) as it appears to have a history of making PILON either way

sharkie

Just for interest, if your are financial able. could your filter off some of the uper money into a pension fund so that it is sheltered from tax?

wozwoz

wow!!! roysterer i am in exactly the same positon as you, i am getting 3 months pilon next month (taxed) and 13 weeks redundancy payment (tax free). i had my 2nd consultation meeting yesterday, it was confirmed by HR that i won't get my pilon tax free. (even though there is no mention of it in my contract terms and conditions). i was quoted exactly what pete111 stated: where no contrractual clause exists if the company has developed a habit of making PILON payments previously - basically saying PILON has effectively become a company policy and is therefore a taxable term of employment, even though it is not in employee contracts.
bit of a downer for me, i hope you get yours tax free. i believe you don't get job seekers allowance during the pilon period either.

dampsquib

In my experience, if you are given a PILON and booted out the door (even if you volunteered for redundancy) then you can sign-on immediately for JSA. If however you had to work your notice, or were on gardening leave during the period of notice, then you wouldn't be able to sign-on until after your last day of employment.

gwokka

i too have just been made redundandant and have no PILON clause in my contract. the company are terminating my contract immediatley and are therefore in breach of contract. the company acknowledge this and have offered me as damages the equivalent of my net pay for the notice period in my contract. they have said this money will not be on my p45 and as such i wont be taxed on it. having reveiwed various websites this appears to be fairly standard in cases where no PILON clause exists in the contract and therefore whether you have PILON clause or not you will receive approx the same money either way. the advantages as far as i can see to not having PILON clause are that you can sign on straight away and you can start work straight away(if you can find a job). The disadvantage in my case is that as my notice period spans the next tax year and if i dont earn enough in the year to get past the tax free threshold had i been taxed i would be able to claim that money back.

getmore4less

Make sure your PILONs are paid in the next tax year,

That way if you don't get a job you will pay less tax than if it was paid in this tax year.

Rich679

I believe you must seek help of an expert tax consultant. Finance related matters need to be solved carefully. Isn't it?