Redundancy - Tax on the package and some other questions.

S

s2000

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Hi there,

I reckon this is the best place to ask! My wife has just been told that there are voluntary redundancies in her work. She is on a 3 day week for the last year and has 10 years with the company (9 years on a 5 day week, 1 on a 3 day week). They are offering 6 weeks pay for every year worked. Just a few questions:

- Normally, would the 6 weeks per year mean 6 weeks on the current salary per year or is it back weighted?
- Are you taxed on a redundancy package or is it all tax free?
- If you take voluntary redundancy can you then claim the dole (as voluntary means you choose to take the redundancy!). I earn about 50,000 a year and so maybe this would not let her claim the dole - is it means tested?
- What other tax implications are there to consider before we decide on whether to apply for this package?


Thanks so much for the help, in advance,

S
 
Hi S2000 (are you driving one?),

Firstly the method used to calculate the actual redundancy amount can vary depending on company policy. In such circumstances common practice would be to average, say, the last 12 pay periods to calculate the average weekly salary. It's probably best to ask the employer which method they are using to value a persons weekly wage.

Depending on how much your wife receives she may be taxed on some of the redundancy. The obligation is on the employer to tax the redundancy payment correctly, under the PAYE system. (Sorry I can't remember the section of TCA 97 off the top of my head, I'd guess at S123)

The basic exemption is as follows:

€10,160 + (765 X Number of complete years of service) = The tax free entitlement.

The second exemption is known as the increased basic exemption:

In this case a person can increase the basic exemption by €10,000, subject to satisfying a number of conditions.

1. If an individual holds a life interest in a Superannuation pension scheme then they must subtract the present day value of the individuals lump sum entitlement from the €10,000 increase. Clearly, this is only of benefit were a persons lump sum entitlement is less than €10,000. If above €10,000 the individual may waive the right to a lump sum payment from the pension scheme.

2. This relief can only be claimed once every ten years.

3. Prior approval must be obtained from the Revenue Commissioners. Again the obligation is on the employer to obtain approval.

The third exemption is SCSB:

This is generally of benefit in an instance where someone is on a high salary.

Formula used to calculate SCSB: (A X B/15) - C

A= Average of last three years salary
B= Number of complete years service
C= Any lump sum entitlement from a Superannuation Pension Scheme, which as not been waived.

With regard to the question about the dole; Sorry I can't help you with that one. My knowledge of the dole is, thankfully, quite limited.

Other tax implications:

If your wife is taxable on some of her redundancy then she can claim Top Slicing Relief on the taxable portion.

I'll detail top slicing relief if you think she will be taxable.....

Hope the above helps.

Regards,

Mini
 
Hi Mini (Do you drive one?!)

I did drive an S2000 when I joined here but no longer. Thanks a million for the detailed reply, I will appy it to our situation and post back.

Great response, cheers!
 
Mini3277 said:
,

Other tax implications:

If your wife is taxable on some of her redundancy then she can claim Top Slicing Relief on the taxable portion.

I'll detail top slicing relief if you think she will be taxable.....

Hope the above helps.

Regards,

Mini
Click to expand...

Mini if you wouldn't mind I would be interested in how the Top Slicing Relief works as I have paid tax on my redundancy payment and have been told I might be able to get some of the tax back that I paid ref: Top Slicing.

Thanks
 
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