Pilon

ponymad_3

Can someone please clarify how PILON works. I am in porcess of taking redundancy under a compromise agreement. Thought i was going to be working 12 weeks notice but on seeing the agreement for the first time at my solicitors this is included
'You will receive a payment in respect of Your entitlement to notice £x' Is this PILON in the true sense and can comeone clarify the tax position.

There I was thinking i had all summer to work and no date yet agreed and now it might be next Thursday!

LittleVoice

ponymad wrote: »

Can someone please clarify how PILON works. I am in porcess of taking redundancy under a compromise agreement. Thought i was going to be working 12 weeks notice but on seeing the agreement for the first time at my solicitors this is included
'You will receive a payment in respect of Your entitlement to notice £x' Is this PILON in the true sense and can comeone clarify the tax position.

There I was thinking i had all summer to work and no date yet agreed and now it might be next Thursday!

What do your written particulars say about pay in lieu of notice? If they make no mention of this but seem to be on the basis that notice is worked, then PILON may well not be taxable. However, if the company does often pay PILON even though your written particulars of employment are silent on the matter, then it may be deemed to be contractual. It is a grey area then unless you can be certain that the employer specifically mentions reserving the right to PILON.

What did your solicitor say about this? They are supposed to be advising you. Did they explain any detriment to you in accepting an immediate end to your contract?

SarEl

Bigmoney2 wrote: »

PILON is taxable as far as i know, maybe NI as well. They are paying you your notice period without requiring you to work it. Don't think you will be able to claim JSA for thid period either as you are being paid.

Jules

Nope on all counts. Unless your contract entitles you to be paid PILON it is not a taxable or Ni-able amount below £30k. The agreement appears to be fairly standard - for legal reasons it is simply to "buy" your right to notice (which is what they mean - we will pay you XX and not give you notice), which operates as a tax free amount. I should clarify that whilst some employers pay gross salary as PILON (and technically this sisn't PILON but "purchasing your notice from you") they do not have to - contrary to popular opinion. These are tax free allowances, not tax free payments - and they are not counted as income for tax purposes.

If you have received either a payment or PILON you can claim JSA provided that you are claiming contributions based and not income based, from the date of the termination of your contract. The contributions based JSA takes no regard of any money you have - it is a right if you are not in employment.

SarEl

LittleVoice wrote: »

What do your written particulars say about pay in lieu of notice? If they make no mention of this but seem to be on the basis that notice is worked, then PILON may well not be taxable. However, if the company does often pay PILON even though your written particulars of employment are silent on the matter, then it may be deemed to be contractual. It is a grey area then unless you can be certain that the employer specifically mentions reserving the right to PILON.

What did your solicitor say about this? They are supposed to be advising you. Did they explain any detriment to you in accepting an immediate end to your contract?

This isn't PILON. It is a settlement to purchase his legal right to notice. Fine but important distinction, because settlements under £30k are not tabable amounts regradless of what the contract says about PILON. It would appear the employer is clever!

ponymad_3

Thanks for the info so far.... I will clarify further as this was a bit out of the blue. The compromise agreement was sent directly to my solicitor so I had not seen til then. I had previously expected to work my notice, Sar you have looked at compromise agreement question for me about this so thanks again.
The full clause is here
You will receive a payment in respect of Your entitlement to notice of £x within 21 days of the later of the Termination Date or receipt by the Company of this Agreement signed by You and the Adviser, subject to any deduction by the Company of tax and national insurance contributions which the Company is required to make.

I thought in some situations PILON was tax free hence my question. I should add I will receive around 70k but only the first £30k is tax free which I understand

I am also interested in knowing when I can start to claim Job Seekers Allowance. (I was expecting to have a while to sort all this out!)

If anyone needs more info to help let me know.
Thanks again appreciate advice.

SarEl

Ah right - well it's all irrelevant anyway because since you are receiving over £30k then it is a total amount and tax will be due. You can't have PILON counted separately. They total the full amount and tax is diue on the amount over £30k. But as I said, PILON is never tax free - it is a tax free allowance, which is very different. As I said, whether the employer pays PILON gross or not is their business - they don't have to. But it isn't counted as taxable income (under £30k) which means that effectively you get more money tax free in the year. I know - it confuses everyone! But it doesn't really matter to you anyway - like I said, you will be paying tax on some of the amount anyway and it doesn't matter what it is called - the £30k is a total of all payments received.

ponymad_3

Thanks SarEl... so it matters not .

LittleVoice.... What did you mean about about my solicitor needing ot advise me about ending my contract immediately, why would this be to my detriment.... I am pleased not to be working my notice

Job Seekers... when do I need to register are you able to clarify or should I post a separate question

Thanks again

LittleVoice

ponymad wrote: »

LittleVoice.... What did you mean about about my solicitor needing ot advise me about ending my contract immediately, why would this be to my detriment.... I am pleased not to be working my notice

Job Seekers... when do I need to register are you able to clarify or should I post a separate question

I hadn't followed your earlier posts so knew nothing of the background of why you might be facing a compromise agreement other than that it was for redundancy. And I still haven't looked at those posts.

I was thinking that if your employment is ended immediately (or at the end of June) when it could have run for a further 12 weeks, then that extra time might have taken you to completing a further year of employment and you might therefore be due extra redundancy pay if you had completed the notice. That would have been needed to be taken into account. However I think that is probably not an issue for you.

However the comment about your solicitor advising you on the full ramifications of what you were being asked to sign stands.

You can contact the jobcentre as soon as you know you are actually no longer an employee.

ponymad_3

Thanks LittleVoice.... No extra years would be applicable.... getting what others would no doubt feel is very beneficial package... I have forced through the redundancy option and I think the main reason compromise agreement insisted on is they don t want people to know about a loophole which has allowed me to force through. its not what they offer. My job was downgraded and as a benefit break resulted our rules are the other 'none marketed option is the money' They are being a bit underhand though as others have found themselves in a similar position and not appreciated what else is on offer. I am being made to feel a bit like a criminal/second class citizen but I think its not too bad a trade off for the deal!
I know I can claim JSA under my NI contributions do I have to register asap after I leave. I don t want to miss out on the weekly allowance. I understand it can t be backdated

LittleVoice

ponymad wrote: »

I know I can claim JSA under my NI contributions do I have to register asap after I leave. I don t want to miss out on the weekly allowance. I understand it can t be backdated

You don't have to register, of course. To be eligible for JSA you will have to demonstrate you are looking for work and go to the jobcentre at least every second week to sign on. So if you were planning to take a holiday straight away, then you would need to wait before registering.

Regarding JSA being back-dated, as I understand it, when it comes into payment it can be backdated to the time you first tried to register but not back to the time you ceased employment.

getmore4less

You might want to read up on a P50.
http://www.hmrc.gov.uk/incometax/stop-work-refund.htm

http://www.hmrc.gov.uk/pdfs/p50.pdf

Your £70k should be taxed heavily when you recieve it based on the new rules, but this is refundable.

If you claim JSA immediately then you will have to wait to get the money back.