Taxation of Pay in Lieu of Notice

Taxedalot

Ironic given my username, but I'm looking for some advice on how Pay in Lieu of Notice (PILON) is treated from a taxation perspective in a redundancy situation.
What I can glean is that if it is a term of one's contract, then it is fully taxable and cannot be included in the ex-gratia lump sum against which one would apply any exemption (standard, increased, SCSB etc).
However, I'm trying to understand just what that means - my contract states that my employer might pay me in lieu of notice at it's own discretion. Does this make a PILON payment fully taxable (exempt from exemption if you will).
My interpretation is that it shouldn't as what's in the contract is quite different to definitively stating that PILON will definitely be paid.
Anyone have expert knowledge of these matters?
Thanks,

Lockedout2

As I understand it where the contract states that an employee is entitled to PILON then it's taxable.

"You are entitled to 6 months pay in lieu of notice" type of thing.

Where the employer is paying the standard notice periods think that fall into the exgratia

Taxedalot

Thanks,
My reading on this now is making me think that there mere fact of it being mentioned in the contract means it will be fully taxable and no exemptions can be applied against it.
Will suffer through the challenge of talking with the revenue to see what they have to say, but not optimistic.
Rgds,

Lockedout2

Are you talking about outside the standard legal requirement?

Are they paying you 6 months salary as there is a 6 months notice period?

Taxedalot

Lockedout2 wrote:

Are you talking about outside the standard legal requirement?

Lockedout2 wrote:

Are they paying you 6 months salary as there is a 6 months notice period?

My contract has a 3 month notice period, so they are paying that.

Spoke to Revenue and it seems that once there is a PILON clause in the contract - i.e. any reference at all to the fact that it might be paid, then it is seen as a contractual payment and therefore fully taxable without any exemption being applicable.

Lockedout2

So your contracts states that you have a three month notice period and your employer is honouring that.

That is a legal obligation on them as both sides signed the contract.

It's not that they might they are obliged to so therefore it's salary and fully taxable.