Round-up of Employment Law Developments: March 2003

 
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This e-bulletin includes short summaries of the following developments:

New Revenue guidelines on taxation of payments in lieu of notice

UK statutory claims by employees working abroad

Dress codes

Use of video evidence

Introduction of equal pay questionnaires

Disability Discrimination - Blind and Partially Sighted People

National minimum wage

Pension lifetime limit / consultation on pension changes

Fee for work permits

Review of the Employment Relations Act 1999 / tribunals

New Revenue guidelines on taxation of PILONs

The Inland Revenue has issued new guidance on taxation of payments in lieu of notice in their Tax Bulletin Issue 63 (available on the Revenue website).

Employers commonly choose to pay employees in lieu of notice rather than require them to work out their notice. Whether such a payment is fully taxable or can benefit from a £30,000 tax-exemption will depend on the terms of the employee's contract of employment and on the employer's conduct.

The Revenue's latest interpretation of the case law is as follows:

where the contract states that the employee is entitled to either notice or a payment in lieu of notice, the payment will be fully taxable.

where the contract states that the employer reserves the discretion to (but is not obliged to) make a payment in lieu if notice is not worked, a payment which is substantially the same in value as provided for by the contractual clause will be fully taxable UNLESS the employer can show that it in fact chose to breach the employment contract and the payment was damages for breach (in which case the £30,000 tax exemption will apply). To persuade the Revenue that the employer has breached the contract and then agreed to pay damages, it will be helpful if the payment has been reduced to reflect mitigation of loss, the payment is net loss with only the balance over £30,000 grossed up and without deduction of NICs, and there is written evidence of a decision not to exercise the discretion to pay in lieu.

where the contract does not provide for a payment in lieu of notice, a termination payment in respect of notice will benefit from the £30,000 tax exemption UNLESS the payment was an automatic response to termination. In the latter case, the payment will be regarded as having its source in the employment relationship and therefore be treated as a fully taxable emolument.

UK statutory claims by employees working abroad

Prior to 1999, employers could be confident that they would not face...

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