Travel And Subsistence
All payments included as part of a termination package within these provisions will need to meet, to HMRC’s satisfaction, the criteria that they are being paid solely as compensation for loss of office and are not remuneration for services provided in the course of employment or office. Where this is the case there is no £30,000 exemption and the package will be liable to tax and National Insurance contributions in full as earnings. PILONS (Payments in Lieu of Notice) In general terms (and except where on its own, or in combination with other termination payments, it exceeds £30,000) a payment in lieu of notice does not attract Income Tax or NICs. However, where such a payment can be shown to result from contractual terms or conditions of employment, including potentially custom and practice, such payments should be assessed for tax/NICs liability. A PILON occurs where an employer ends the contract of employment without fulfilling the statutory and contractual notice provisions, and in recognition makes a lump sum payment by way of compensation in place of the normal contractual/statutory payments that would otherwise be due. For HMRC’s latest position on termination payments see their Employment Income Manual at http://www.hmrc.gov.uk/manuals/eimanual/EIM12977.htm. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS From 6th April 2018 all PILON payments are to be included in the £30,000 exemption figure for terminations and must be treated as liable to both Income Tax and NICs to the extent that the amount is a Post-Employment Notice Period (PENP) sum. This is calculated as BP × D/P – T, where BP is the Basic pay in the last pay period before the trigger date (the relevant date which triggers the requirement for the calculation), D is the number of Days in the PENP, P is the number of days in the Pay period and T is the Total value of the payments or benefits received in connection with the termination, excluding compensation for holidays not taken or any bonuses. Any sum which is calculated as a PENP is treated as normal pay for tax and NICs purposes and any remainder will be used against the £30,000 exemption for termination payments. From 6th April 2019 further changes were implemented: • payments in excess of the £30,000 exemption to attract employer’s NICs • all PILONs to be treated as earnings, attracting Income Tax and NICs in full. TRAVEL AND SUBSISTENCE Travel by an employee between two workplaces that he or she must attend to carry out the duties of the same employment is classed as business travel. Business travel expenses are generally exempt from PAYE liability. No printing, copying or reproduction permitted. Allowable expenses may include: • public transport costs • hotel accommodation • meals • tolls, congestion charges, parking fees • business phone calls, fax or photocopying expenses, but may not include anything not directly related to the business such as private phone calls or newspapers except when covered by the exemptions for incidental expenses - see Incidental Overnight Expenses below.
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