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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
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Please advise if PILON is taxable. There is nothing written

Resolved Question:

Please advise if PILON is taxable. There is nothing written into my contact thar would indicate it is and I believe this is a grey area.
Submitted: 11 months ago.
Category: Employment Law
Expert:  Ben Jones replied 11 months ago.

Hello does the contract say pilon is possible?

Customer: replied 11 months ago.
No I don't think pilon is mentioned at all
Expert:  Ben Jones replied 11 months ago.

Ok if the contract contained a PILON clause allowing your employer to terminate your employment under PILON, then the notice pay will be taxable as it is a contractual payment.

If here is no PILON clause but the employer has a custom of making PILON payments, HMRC may seek to tax the PILON under section 62 of ITEPA 2003, either on the basis that an implied contractual right has arisen, or on the basis of an "auto-PILON".

Auto-PILON’s arise when a non-contractual PILON may still be taxable under section 62 of ITEPA 2003 and be liable to tax. This will occur where the making of a PILON could be said to be an "automatic response to a termination". This is again a custom and practice point, which would depend on whether PILON’s are made as a matter of course by this employer. If there is a variation in their procedures and some employees are paid PILON whilst others are asked to work their notice period, then it would be more difficult to make this an auto PILON, which means it will not be taxable.

I hope this has answered your query. I would be grateful if you could please take a second to leave a positive rating (3, 4 or 5 stars) as that is an important part of our process and recognises the time I have spent assisting you. If you need me to clarify anything before you go - please get back to me on here and I will assist further as best as I can. Thank you

Customer: replied 11 months ago.
Thanks for explaining
Expert:  Ben Jones replied 11 months ago.

you are welcome. If your original question has been answered I would be grateful if you could please quickly rate my answer by selecting 3, 4 or 5 starts at the top of the page - it only takes a second to do and is an important part of our process. I can still answer follow up questions afterwards if needed. Thank you

Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 46743
Experience: Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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