Readers’ forum: When is the date of a PILON for tax purposes?

My client received a payment in lieu of notice (PILON) from her employer in March 2020. According to her settlement agreement this payment should have been made by her employer 21 days after her employment settlement agreement termination date of 31 March 2020.

We requested that this be paid to her early to enable her to pay some bills. For her 2019-20 return we deducted this payment from the 2019-20 employment income and declared it instead on her 2020-21 return because this additional income would have otherwise taken her into a higher rate tax bracket resulting in increased tax of £3 500 and her having to pay extra tax for a payment protection insurance claim instead of getting tax back.

HMRC disputed the tax return and said it must be declared in 2019-20 and added this income back to the 2019-20 return. This resulted in a £3 500 increase...