Settlement agreement advice needed!!

Nick_C

anamenottaken wrote: »

Are you saying that PILON is automatically non-taxable?

If you really need to know, start by reading http://www.hmrc.gov.uk/manuals/eimanual/eim12975.htm
and
https://www.gov.uk/redundant-your-rights/notice-periods

Although I suspect you are just trying to waste my time.

To satisfy your pedantry though, let me rephrase what I said above.

The question as to whether the employee has to serve a notice period (on gardening leave and paying tax on the salary) or is given pay in lieu of notice (which may be non taxable) is open to negotiation if the two parties aim to reach an agreement.

getmore4less

pilon is not tax free on top of the 30k

Pricivius

If the OP's contract says the employer may give him a PILON, the tax status is not negotiable, unless both parties are prepared to risk the wrath of HMRC. PILONs are taxable as notice pay would be. If there is no PILON clause in the contract, the settlement agreement can end the employment immediately and a sum can be added to the settlement sum to reflect notice, but which is not notice or a PILON and can be tax-free within the £30,000 sum. This is slightly simplistic as it also depends on the employer's history of such payments which HMRC will consider.

But it is not the case that the tax treatment of PILONs is negotiable.

Nick_C

Thanks for your helpful post Pricivius. I didn't intend to suggest that the tax position on pay in lieu of notice was negotiable. What is negotiable is to ask for PILON instead of service a notice period. PILON is an addition to redunancy pay, but the tax limit applies to the aggregate of the two.

The OP mentioned that a redundancy settlement had been offered. I just wanted them to be aware that they should be able to get PILON on top of this.

Thanks again for your clarification.

anamenottaken

Nick_C wrote: »

[snip]

Although I suspect you are just trying to waste my time.

To satisfy your pedantry though, let me rephrase what I said above.
[snip].

I wasn't attempting to waste your time but trying to establish the correct statement. I think we have now reached that position. If I'm a pedant, that's fine by me.