Tax Update (November 2008)
Attachment of Earnings or not
A recent advice line question asked whether an Attachment of
Earnings (AOE) could be deducted from a redundancy payment which
included a payment in lieu of notice (PILON) for an employee that
was not required to work his notice period.
From a redundancy point of view it is dependant upon the type of
AOE. If it is in relation to maintenance, fines and civil debts
then deduction can be made. However if it is in relation to Council
Tax then no deduction is allowed.
In relation to the PILON this will be a payment of compensation
for breach of contract in that the employee as not been allowed to
work their notice period. As compensation it will not be earnings
and therefore no deduction of AOE can be made. However, if the
contract states that the employee is entitled to a payment in
respect of the notice period then the payment will be contractual
earnings and therefore deduction could be made.