What payments are PILONs?

In the House of Lords case of Delaney v Staples, Lord Browne-Wilkinson helpfully summarised payments that may be classed as PILONs into four categories. This case was not a tax case but is very useful in understanding the different types of payments that can be made. The categories are discussed below:

1. •

   an employer gives proper notice of termination to an employee, but does not require the employee to attend work up to the termination date and pays them the wages attributable to the notice period. This situation is commonly called ‘Garden Leave’, see the Garden leave and the right to work guidance note. There is no breach of contract by the employer. The employment continues until the expiry of the notice. If the payment is made as a lump sum payment in advance; this is simply advance payment of wages.