In light of #COVID19 #coronavirus, can an employer withdraw a job offer?
ACAS indicate that an employer can withdraw a offer of a job. However, if the offer had been accepted, then there may be a potential breach of contract.
So there some question over whether the offer was conditional or unconditional.
More information can be found:
If the offer is withdrawn then the associated ending of any employment contract needs to fair and may involve compensatory payments.
Some payments may be due under the contract such as notice or PILON, whereas other payments may be discretionary.
What is the tax position of any payment?
HMRC indicate the following in relation to the tax position of any payment:
The tax position of any individual case will depend on the terms and conditions of the employment contract in that case and the entitlement that is conferred on the employee by that contract. It is not possible for HMRC to give one definitive view that will extend to all cases.
As a general principle, HMRC would agree that the payment derives from the termination of the employment, and is compensation for such termination. We therefore consider the payments to essentially be Payments In Lieu of Notice (PILONS) and to fall within section 401 of ITEPA. We agree that if the employee has not started work BP will be zero and consequently PENP will be nil, so the payment is subject to the £30,000 exemption allowed by section 403.
However, if the employee has a contractual entitlement to a PILON and the payment represented that contractual entitlement, then we would consider this to be a payment of earnings and taxable as employment income. This is because the payment would be a replacement for an amount (i.e. the contractual entitlement) that would itself have been a payment of earnings.
We note the view that there would be no employment if the offer was conditional and there was room to say any of the conditions are not met. We accept this point as a general theoretical principle but cannot see that it can fit with a situation where a compensation payment is made. If an employee did not meet the requirements needed for the employment to commence, for example if they did not pass a DBS check or did not produce required references, then it is difficult to see why a compensation payment would be made. There would be nothing the employee could claim as they would have failed one of the requirements for entering into employment. HMRC’s view is therefore that the existence of a compensation payment is sufficient to indicate that there was some kind of agreement, such that a contract of employment existed and there was consequently something that was terminated by the payment.