Termination payments

Question 1

What is a PILON how does this relate to a PENP

Answer 1

PILON - payment in lieu of notice this is partially taxable.
The part that is taxable will be the proportion that relates to the Post employment notice (PENP) this is usually the employee’s basic salary they would have recieved had they been able to work their notice period

Question 1

What is the main thing to determine with regards to termination payments

Answer 1

Is the payment a reward for services and therefore earning or a compensation for loss of office therefore no earning.

Can determine if reward for servies if a contractual payment or it is reasonably expect (paid to previous employees)

Question 2

What are exempt benefits

Answer 2

ER’s pension contributions
Payments for disability/ injury can no longer perform death
Payments on dealth
Training costs
Payments for legal services (paid directly to advisor)

Question 3

Explain Income tax and NI implications

Answer 3

Taxable payments subject to IT and class 1 primary NI

Partially taxable payment (in excess of 30,000) subject to IT and employer pays class 1A NI

Question 4

How is the amounts taxed

Answer 4

If the payment is made prior to the P45 being issued then normal tax code used

If the payment is made after the P45 has been issued a T0 tax code is used

Class 1A if cash paid through PAYE 19th 22nd
Class 1A if benefit P11D 6th July

Question 5

What are usually partially taxable payments

Answer 5

Ex gratia (thank you)
Statutory redundency
Non statutory redudency
MV of car