- Tax on termination payments—the post-employment notice pay (PENP) rules in practice
- The background to the legislation
- Can the parties agree a shorter notice period?
- Taxation on summary or constructive dismissals?
- Employee’s shorter notice period
- Basic pay: low/no pay or unusually high amounts of pay
- Basic pay and allowances
- Action points for practitioners
Tax analysis: In April 2018, the new regime relating to the tax treatment of certain payments made on termination of employment—in particular, payments in lieu of notice (PILONs) rules—came into effect. Although the new rules were introduced as part of a tax simplification drive, they have nonetheless given rise to several areas of uncertainty, in particular in relation to the post-employment notice pay (PENP) provisions. Sam Whitaker of Shearman & Sterling examines the issues, including when the anti-avoidance rule applies where parties agree a shorter notice period, the taxation position on summary or constructive dismissal, when the employee gives shorter notice than the employer, and how to determine what is meant by ‘basic pay,’ for instance when the employee receives low/no pay or unusually high pay in the period prior to termination.
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