From April 2018 basic Pay in Lieu of Notice (PILON) is now subject to payroll tax and NIC in full. For many employers there was previously been little or no need to identify what is and isn’t PILON when making a severance payment.
The additional processes requires identification of the date notice was effectively served, the employee’s contractual or statutory notice period (whichever is higher), and any unworked notice (defined in statute as “post-employment notice period), in order to identify any PILON outstanding upon termination.
In addition Foreign Service Relief was also abolished from April 2018.
The proposed charging of Class 1A (employer’s) NIC on other sums over £30,000 has been delayed to April 2019 Overall we are told the changes are intended to bring some ‘fairness and clarity’ to a complex area! However the previous pretences of ‘simplification’ and tax neutrality have been dropped from the latest guidance; in practice each of the new measures will only increase the Treasury’s tax/NIC take, as well as the employer’s costs and responsibilities.