[EIM12977] EIM12977 – Termination payments and benefits: payments in lieu of notice (PILONs): payments made automatically, habitually or by practice or custom
With effect from 6 April 2018, an element of all payments received in connection with the termination of a person's employment are chargeable to income tax as general earnings (see EIM13874).
As EIM00640 explains, in some circumstances a payment made without legal obligation can be chargeable as earnings under section 62 ITEPA 2003 if it is customary to make it. This is to be considered when there is no written reference in employment terms to PILONs (see EIM12976). Cases such as Corbett v Duff (23TC763) and Laidler v Perry (42TC351) demonstrate the general proposition that voluntary or non-contractual payments may be within section 62 ITEPA 2003 (see EIM01040 and EIM00645).