Lump sum PILN - tax free?

Cody

Hello;

I have been offered a lump sum PILN for my three months notice, which is tax free in my case it seems.

My question is whether I should therefore recieve the gross amount, i.e. 3 X gross monthly pay, or the company just pays me my net pay, i.e. 3 x monthly net pay, and saves paying any tax.

Which is normal, for the company to save the tax that would have been payable if I saw out my notice, or for me to recieve a higher amount as a lump sum than if I saw out my notice?

many thanks

Cody

getmore4less

Depends, they can do either gross or net I think some places don't realise they can pay net so you take a risk if you ask.

The real issue is if HMRC do not agree it can be tax free.

If there are contractual PILON terms or they use PILON a lot it can be taxable.

ableandy

Without contractual provision, a termination of employment with PILON is likely to be a breach of contract. Usually the employer would compensate for this by including all the remuneration and benefits the employee would have been entitled to during the notice period. To avoid later disagreement, some employers include a payment for any holiday that may have accrued during the period too, even though they may not technically be required to.

If PILON is contractual you have to pay tax on it. If it is not a payment of "compensation" for termination which is paid tax free.

Getmore4less is correct in that some employers do not realise that they can pay it NET of deductions, you should get a forecast of the sum to be paid, once you have this you can either check it yourself or give ACAS a call on 0300 123 1100 (8am-8pm Monday to Friday and 9am-1pm Saturday) and they will take you through the forecast for free.

st3v376

Ableandy,

I wonder whether you can help? I have posted similar on another thread, but from your comments perhaps you could assist me with some guidance....

I was made redundant in October, worked 1 month out of 3 and was paid in lieu for the remaining 2 months.
There was no PILON clause in my contract so the payment was outside the contract and I believe the employer to be in breach.

I would like to attempt to recoup the tax paid, but would like to find out the best way to achieve success, I understand HMRC are quite keen on treating such payments taxable, outside the 30k tax free amount.

Any idea's on how best to approach attempting to recover this? Do I do it through the tax return? If so I am not sure where I would detail it.

Many Thanks in advance!

LittleVoice

Though you worked for only one of your three months' notice period, was your employment actually terminated after one month or were you simply not required to work?

What does the company normally do when someone is not required to work their notice and has their employment terminated? Have they been known to pay PILON?

st3v376

Hi Littlevoice.

Letter of termination was provided at end of October, terminating employment with three months notice. Stipulating an end date of the 30th November and stating that payment in lieu of notice would be paid.

There have been other redundancies over the past couple of years but I was in a remote office, only 5 of us, and there was no contact with those made redundant so genuinely have no idea whether payment was made in lieu.

I was also employed by a company that was acquired, so my contract was written by the acquired company not the company that I was terminated by (if that makes sense). I was transferred under TUPE, and the contracts of those of us in the acquired company could be different, I would assume are different, to the contracts provided to employees of the acquiring company.

I don't believe there was any precedent. There may have been, but not one that was known or public.

Thanks for the reply,

LittleVoice

st3v376 wrote: »

Hi Littlevoice.

Letter of termination was provided at end of October, terminating employment with three months notice. Stipulating an end date of the 30th November and stating that payment in lieu of notice would be paid.

There have been other redundancies over the past couple of years but I was in a remote office, only 5 of us, and there was no contact with those made redundant so genuinely have no idea whether payment was made in lieu.

I was also employed by a company that was acquired, so my contract was written by the acquired company not the company that I was terminated by (if that makes sense). I was transferred under TUPE, and the contracts of those of us in the acquired company could be different, I would assume are different, to the contracts provided to employees of the acquiring company.

I don't believe there was any precedent. There may have been, but not one that was known or public.

Thanks for the reply,

As your original written contract was silent as to PILON, I think you may be stuck with the custom of your current employer as to whether it would be taxable. They have deducted tax as a way of covering their own backs so they are not required to pay the tax on what HMRC may have otherwise deemed to have been a nett payment.

I see that the other thread on which you asked the question was on this board. You may find you get an answer if you start your own thread and use the Cutting Tax section of the Essential Money board.

st3v376

Thanks Littlevoice, will do.