Does the Income Levy apply to Redundancy Payments?

[Brendan Burgess]

Is the Levy charged on Redundancy payments?

 

[Brendan Burgess]

In the new PDF [broken link removed]issued by the Revenue yesterday, it says

1.11 Will redundancy payments be subject to the levy?

Statutory redundancy payments are exempt from the levy. ...

In addition, ex-gratia redundancy payments in excess of the statutory redundancy amount are exempt from income tax, and therefore also the income levy, up to certain limits. ...

Any relevant emoluments paid which are in excess of these limits are subject to the income levy in accordance with section 531B (as inserted by section 2 of Finance (No. 2) Act 2008) of the Taxes Consolidation Act 1997. It should be noted that the income levy is charged after granting the statutory exemptions set out above, but before granting any additional relief or deduction for Standard Capital Superannuation Benefit (SCSB) or Top Slicing Relief (TSR).

Appendix B Exempt Income Sources
Section 201 Basic and increased exemptions in respect of tax under section 123 (Redundancy) excluding SCSB and TSR

Section 203 Payments in respect of Redundancy

 

[Brendan Burgess]

So the amount exempt will generally be

€20,120 + €765 per year of complete service.


If you don't qualify for the increased exemption of €10,000, then the amount exempt will be €10,120 + €765 per year of service.

Ignore SCSB and Top Slicing Relief

 

[Fairplay]

Brendan,

The last paragraph on page 4 seems to give a concessionary treatment in relation to SCSB:

"Following consultations regarding the above treatment, the Revenue Commissioners will now allow the same treatment for income levy purposes as applies for income tax purposes in relation to redundancy payments, as an administrative concession. That is, the income levy will be charged after granting any additional relief or deduction for Standard Capital Superannuation Benefit (SCSB). The Department of Finance will bring forward proposals for legislative change to support this concession in the next Finance Bill. "

 

[Meathman123]

First post so hope I don't make a mess of this.


In work we are currently implementing a redundancy scheme (voluntary thankfully) Income levy is one of the issues I have looked at. I have been keeping an eye on the Income Levy FAQ document on the Revenue site. That I am aware of there has been 3 versions of this document.

1 somestage in December - It made reference to Basic & Increased Exemption being deductable but not the scsb. However, the CG's office confirmed orally that the scsb was not levyable.

Another version on the 9th of Jan - Saying the same as Dec for Basic & Increased Exemption but scsb is levyable ??? Raised a query on this with CG and our case officer in LCD.

Current version on the 14th of Jan adding the paragraph quoted by Fairplay above. Got confirmation from LCD re treatment on the 15th.

Seems like Revenue are as confused on this as many of the rest of us are.

 

[irishpancake]

I think it's only fair to point out that information given by Brendan at the start of this thread, has been superseded by later versions, the latest is 30th Nov. 2009.

The Para quoted by Brendan now reads:

1.11 Will redundancy payments be subject to the levy?

Statutory redundancy payments are exempt from the levy. Statutory redundancy payments amount to 2 weeks pay per year of service plus a bonus week subject to a maximum payment of €600 per week.

In addition, ex-gratia redundancy payments in excess of the statutory redundancy amount are exempt from income tax, and therefore also the income levy, up to certain limits. These limits are up to €10,160
plus €765 per complete year of service in excess of the statutory redundancy. The basic exemption as outlined above can be further increased by up to €10,000 if the person is not a member of an occupational pension scheme.

Any relevant emoluments paid which are in excess of these limits are subject to the income levy in accordance with section 531B (as inserted by section 2 of Finance (No. 2) Act 2008) of the Taxes Consolidation Act 1997. It should be noted that the income levy is charged after granting the statutory exemptions set out above, and after granting any additional deduction for Standard Capital Superannuation Benefit (SCSB).

The taxable element of redundancy payments paid between 1 January and 30 April 2009 will be subject to the income levy rates and thresholds in force in the first four months of 2009.