HMRC has published draft legislation changing the taxation of termination payments, intended to come into force April 2018. The main changes are:-
- make all PILONs (payments in lieu of notice) taxable, even if they are non-contractual (currently if a PILON is made that is non-contractual it is paid free of tax);
- require payment of employer NICs on sums over £30,000 (not currently payable);
- ensuring payments for injury to feelings are subject to tax (there is currently a conflict of judicial authorities on this point)
Consultation closes on 5th October and the full draft legislation document can be viewed here
Comment: This will be worth keeping an eye on given that many employers have got used to this £30k compensation threshold for non-contractual PILON termination payments.
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