Hi there, does anyone know if Pay In Leu Of Notice is tax free or is it taxable?

Many thanks as always

Taxable 🙁

Can anyone send me a link stating so officially?

to the best of my knowledge, payment in lieu of notice is non-taxable when agreed as part of a compromise agreement. But only because it hasn’t been challenged through the courts as yet.

due to their being any number or specifics contractual terms etc in the agreement for payment in lieu of notice, it is impossible to give a clear answer.

Pay in lieu of notice is a contractual payment in relation to your employment and is therefore taxable.

F

Check here

Is your notice pay taxable?

If you work your notice, you will be taxed at the usual rate on the money you earn in your notice period.

If your employer offers you a payment instead of you working your notice this is called ‘PILON’ or ‘payment in lieu of notice’. PILON is only taxable if your employment contract says it is, or it is normal practice in your workplace. Otherwise, it is not taxable.

If the PILON, together with redundancy and other compensation, adds up to more than £30,000, anything over the £30,000 is taxable at the usual rate.

http://www.hmrc.gov.uk/manuals/senew/SE12976.htm

Where an employee receives a ‘contractual’ payment in lieu of notice (‘PILON’), it is chargeable under Section 19 ICTA 1988 as an emolument from the employment.

F

I’m being offered a compensation contract and being told that my PILON won’t be taxed.
I just want reassurance.

so if there’s no mention of PILON in the contract, payment is tax free.

I think it only refers to my Contract of Employment “PILON is only taxable if your employment contract says it is”

Not the Compensation Contract…?

PILON itself doesn’t need to be mentioned in your contract. If you have a contractual notice period eg 4 weeks then if they give you notice today you have a right to be paid under that contract for another 4 weeks. If rather than you working it you get paid for it then it is taxable as it relates to your contractual rights.

If your contractual notice is 4 weeks but because they are giving you no notice they offer you say 12 weeks pay then 4 weeks is contractual and 8 weeks is ex gratia and not taxable. The additional 8 weeks is not strictly PILON as the two periods are not the same and it doesn’t relate to your notice period.

Its difficult without knowing exactly what you are being paid and what for.

F

My Notice period is 3 months. The company are offering me a package (compensation contract) which includes my 3 months Notice.
It’ll make a big difference as to whether I accept this package if I’m to be taxed for my Notice period. The company want me to leave straight away and not work my Notice.
They have also said that it will not be taxed – however, the person offering this is actually Dutch and not that well up on UK employment law.
Hence my original question.
Can you confirm?

Sorted – thanks