A colleague of mine has been 'let go' from his contract due to the current economic climate and he asked me a question. He has a three-month notice period in his contract and while the company are certainly paying the three month period up, he asked me if this could be classed as 'severance pay' rather than standard notice period pay. I'd love to help him so wonder if anyone knows if this is do-able?
Any legal bods about?
- Thread starter PaulB
- Start date
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fossyant
Ride It Like You Stole It!
- Location
- South Manchester
He may need it in writing from the company, and it would be payable upon leaving in a lump sum, not as a monthly salary for 3 months.
Look here !
http://www.hmrc.gov.uk/manuals/eimanual/EIM12976.htm
Look here !
http://www.hmrc.gov.uk/manuals/eimanual/EIM12976.htm
Ah, a request for tax avoidance advice! Well, as Fossyant's link says, notice pay is subject to PAYE and NI in the normal way. Any device intended to circumvent that is potentially fraudulent.
Btw, I assume your friend has not been employed long enough to qualify for protected employment rights. If he has, there may be a redundancy/unfair dismissal issue.
Btw, I assume your friend has not been employed long enough to qualify for protected employment rights. If he has, there may be a redundancy/unfair dismissal issue.
Arjimlad
Tights of Cydonia
- Location
- South Glos
If they are entitled to pay in lieu of notice (PILON) because of a clause in the employment contract that says so, then it flows from the contract and is subject to PAYE and NI.
If the company is breaching the contract by paying in lieu (i.e. the contract does NOT entitle the employer to PILON) then the payment is arguably a severance payment and damages for breach of contract, and thus exempt under Sections 62, 225, 394 and 401 ITEPA 2003.
Bear in mind that the HMRC may argue a contractual entitlement to PILON established by the custom & practice of the employer. If it has always given PILON in this way and is a large employer, then HMRC is likely to say that this is not a severance payment.
I had a client reclaim tax and NIC his employer deducted when it insisted on paying PILON in breach of contract.
If the company is breaching the contract by paying in lieu (i.e. the contract does NOT entitle the employer to PILON) then the payment is arguably a severance payment and damages for breach of contract, and thus exempt under Sections 62, 225, 394 and 401 ITEPA 2003.
Bear in mind that the HMRC may argue a contractual entitlement to PILON established by the custom & practice of the employer. If it has always given PILON in this way and is a large employer, then HMRC is likely to say that this is not a severance payment.
I had a client reclaim tax and NIC his employer deducted when it insisted on paying PILON in breach of contract.
He's been with us for almost exactly one year. He did look in to unfair dismissal but that doesn't apply now. We had to let another employee go two weeks ago but she seems very pleased at her terms and conditions. My mate hasn't received anything on paper yet, he just has what he's been told.
fossyant
Ride It Like You Stole It!
- Location
- South Manchester
Under a year and they can just wave bye bye unfortunately
It's JUST over a year. By six days apparently!
