Payment in Lieu of Notice help please folks

lloydyd

Dear all,

I was asked to leave my employment last week. They sited that I had not met the standards required to fulfil my role. My contract states that after probation (3 months) I have to give 3 months notice as does my employer. I am 11 1/2 months into my employment.

They have agreed to pay me 3 months notice in lieu of notice. I wanted to know if this is taxable?

It Notwithstanding the period of notice tp which you may be entitled. it is a term of this contract that if a payment is made to you by the company equivillent to the amount of pay you would have received if working that period, or a remaining part therof, you agree to waive your right to notice for the period to which such payment relates.....

what does that mean? and is it to do with PILON??

thanks

Gordon_Hose

PILON is taxable. It is just your normal pay in one lump sum, given to you instead of working your notice.

Pete111

To my mind that is a PILON clause (albeit a slightly oddly worded one)

As such, your pay in lieu is taxable I'm afraid.

P.

kborom

I was told this morning that PILON is taxable if it is a part of your contract.

My contract does not mention this, and as such was told that my PILON is not taxable (up to £30K threshhold).

That statement (from your contract?) just says that you accept PILON if asked to leave rather than working the notice period.

langsmith

Yes, PILON is taxable I'm afraid. However, as the tax year is broken down into 12's, when you start work again you maybe entitled to a Tax rebate.

langsmith

kborom wrote: »

I was told this morning that PILON is taxable if it is a part of your contract.

My contract does not mention this, and as such was told that my PILON is not taxable (up to £30K threshhold).

That statement (from your contract?) just says that you accept PILON if asked to leave rather than working the notice period.

Re: (up to £30K threshhold).

This threshold is for Redundancy not PILON. For Redundancy, £30k is the tax free limit. After that, normal tax applies.

Put some into a pension thus reducing the tax burden if you can.

Pete111

kborom wrote: »

I was told this morning that PILON is taxable if it is a part of your contract.

My contract does not mention this, and as such was told that my PILON is not taxable (up to £30K threshhold).

That statement (from your contract?) just says that you accept PILON if asked to leave rather than working the notice period.

Correct - however ultimately it's down the the interpretation of HMRC. Most companies that make a habit of paying PILON even though they may not have it mentioned in contracts would be deemed to have an 'regular practice' of doing so and tax would be payable.

The clause above would be enough to HMRC all over a company so I doubt the OPs firm will run the risk of paying them gross of tax - after all they will be the ones the HMRC comes to first if thery want their cut!

These days, most firms tax PILON payments whatever - just to be on the safe side.

LittleVoice

langsmith wrote: »

Yes, PILON is taxable I'm afraid. However, as the tax year is broken down into 12's, when you start work again you maybe entitled to a Tax rebate.

. . . provided that the new employment has a salary payment before the end of the tax year. Otherwise it will require a claim to HMRC.

getmore4less

P50 sorts out overpayments if you delay JSA benifits.

If done this year might be better to delay the JSA till April since it is taxable anyway.


Either way a tax return is always an opton to tidy up the payments with HMRC to avoid future issues.

langsmith

LittleVoice wrote: »

. . . provided that the new employment has a salary payment before the end of the tax year. Otherwise it will require a claim to HMRC.

Correct, get in touch with HMRC straight away; I did.

Reason, last job had benefits taxable by HMRC, so getting in touch changes you tax code.

I have been informed I should claim as soon as I get back into employment, not worth worrying about at the moment because of JSA etc.

I had a very nice aldy dealing with my query too.:j