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Law Queries
Payments in lieu of notice
Q. Do the new taxation rules on payments in lieu of notice (which came into effect on 6 April this year) apply if our member’s employment terminated at the end of March, but the payment was made after 6 April?
No. There has been some confusion over this issue, but the government has recently clarified that for the new rules to apply, the termination of employment and the payment must take place on or after 6 April 2018.
HMRC guidance, Relevant termination awards received on or after 6 April 2018, confirms the precise circumstances in which the new rules apply.
The new tax rules introduce significant changes to the taxation of termination payments, including in relation to payments in lieu of notice (see Labour Research, January 2018, page 20).
HMRC recently released guidance on all these changes in its Employment income manual. The guidance is available online.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim13874