PILON

[AvocadoK]

Everything points to the PILON being non taxable. But if the ex employer insists on deducting tax, there is little you can do to stop them. From their point of view, deducting PAYE is a safer bet.

Keep all the documents, staff handbook, contract, notices etc, with a view to claiming back the tax next April via your tax return.

Regards

AL

[section 44]

formal notice of dismissal due to redundancy with immediate effect on the 24th June 2011

A breach of contract if you are entitled to 3 months notice (i.e. not a PILON because the contract was broken by the employer).

[mark238]

That's correct they have breached my contract but thought that because the chose to do so my redundancy would be tax free. Where do I stand on breach of contract ?

The only things which I could consider as financial loss would be ( correct me if I'm wrong ) any premium rates for working overtime my pension and the company phone I was given which was used for personal also and maybe healthcare.

When I received my financial statement Friday I questioned why my additional holidays weren't included and also last weeks pay and my week in hand also the taxation.

The director contacted me Monday an said he would send me a new statement including these Items but I'm yet to receive.

Think I may require an employment law solicitor sometime soon but first I will try to go into writing with my previous employer.

[Gnome]

Only just caught up with this one and, having had arguments-a-plenty with HMRC over the years on this subject I'd be intrigued to find out how it all ended or is getting on.

As others have commented, HMRG will argue until they are blue in the face that PILONs are taxable. They went through a spell a few years ago where absolutely every person you spoke to on the matter used the phrase "as day follows night" like some sort of mantra - as if by saying that it would end all arguments. This is why we have the situation today where employers like this automatically - and often unnecessarily - subject such payments to tax and NI just to be on the safe side.

The key facts to use in any appeal against this payment being taxed are:

1) You were entitled to a notice period from your employer of three months;

2) Your employment contract did not grant any entitlement to the employer to replace that notice period with pay;

3) There were no other documents/handbooks/statements of practice in circulation that could be interpreted as forming part of the employment contract stating that the employer reserved the right to make such payments;

4) It was not the employer's usual and invariable custom and practice to make such payments to the extent that an expectation of payment would arise; and

5) By failing to give the notice period stated in the contract, the employer has broken the contract.

If you can establish all of these points (and there are some assumptions on my part in there I'll admit) then any payment in respect of the lack of notice period is a compensatory payment for the breach of contract. As such it will fall to be taxable under S401 - which means that it would only be taxable to the extent that the payment exceeds £30k - rather than S62 which treats the payment as if it were salary. If it falls within S401 there's also the benefit of the fact that there's no NI even if it exceeds £30k.

[towat]

Don't employers have to allow a consultation period before making anyone redundant?

[Peter D]

http://www.hmrc.gov.uk/manuals/eimanual/EIM12975.htm Throws some light on this. Regards Peter

[section 44]

Don't employers have to allow a consultation period before making anyone redundant?

No, although a failure to do so may be relevant to any claim/damages. Practically an employer doing so should get the persons involved to sign a compromise agreement in return for an enhanced payment.

[mark238]

Just a quick update on this, I have just received a letter from the revenue stating that they will be providing me with a refund. Merry Christmas indeed thanks to all who advised

Mark