The following Employment Tax guidance note by Tolley in association with Sue El Hachmi of Osborne Clarke LLP provides comprehensive and up to date tax information covering:
Payments in lieu of notice are known as PILONs. In practice, this phrase is used to describe a range of payments made on termination of an employee’s employment. See EIM12975.
In essence, a PILON is a payment made to an employee when proper notice of termination is not given. The PILON is paid to compensate for the wages and benefits not received during what should have been the notice period.
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:
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