Tax Treatment Of Lump Sum Termination Payments

Revenue have recently issued a revised manual (Part 05.05.19, Income Tax, Capital Gains Tax, Corporation Tax manual) consolidating all previously published documentation concerning the taxation to be charged on ‘ex-gratia’ lump sum termination payments on the cessation of an employment, which are chargeable to tax under Section 123 of the Taxes Consolidation Act, 1997.

The revised manual details the specific exemptions and reliefs that may be claimed by persons in receipt of such lump sum termination payments, in line with specified criteria. The revised document includes the revisions introduced in the Finance Act 2013 and Finance (No2) Act 2013 in relation to:-

  1. The restriction of top-slicing relief for the 2013 year of assessment in respect of lump sums in excess of €200,000,
  1. The abolition of ‘Foreign Service Relief’ with effect from 27th March 2013, and
  1. The abolition of ‘Top Slicing Relief’ with effect from 1st January 2014.

What questions do you have?

Should you have any specific queries in relation to the taxation of lump sum termination payments, we are happy to help. Please do not hesitate to contact Mary Flanagan, Director of Business Advisory Services, (01-6779000) for further details.

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