Why do you think that he should not be taxed on such salary payments?!
Well, I know it would seem that it is salary and should be taxed... but the Revenue are the ones suggesting that under certain certain circumstances it would not.
They say "where the contract of employment provides for a payment of this kind on termination of the contract"... then tax is due.
This is confusing... if the contract says we might pay this... at our discretion... then has it provided for a payment of this kind?
On a more general level, what is the logic of this? If the contract does not mention payment in lieu why should it not be taxable, whereas if it does mention it it is taxable? Surely most contracts will mention it? Otherwise the company has to allow the guy to come to work for a few weeks, when they won't want him to. Why penalise the employee for the presense of a clause that benefits the company?
As I said, if it was always taxable, then fine, it makes sense. However why should the contract matter? unless the notice period exceeds the legal requirement.
I know the answer may be "tax does not make sense" but I just thought I had to ask.
Ix.