Lump Sum Payments (Redundancy/Retirement)

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What is Taxable

Lump sum payments paid on Redundancy/Retirement are taxable. However, they qualify for special tax treatment. They may be exempt or qualify for some tax relief.

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Tax Relief

As follows;

  1. Basic Exemption - The Basic Exemption is €10160 plus €765 for each full completed years service with the employer. If it is the claimant's first claim the Basic Exemption may be increased by up to €10,000* subject to certain conditions. From 1/1/02 the increased exemption of €10,000 may be availed of by an individual every 10 years.

    Increased Exemption - If claimant is not a member of an occupational pension scheme or has irrevocably given up the right to receive a lump sum from the pension scheme the basic exemption at (1) above may be increased by €10,000*. If claimant is a member of an occupational pension scheme the increased exemption of €10,000* is reduced by,
    1. the amount of any tax free lump from the pension scheme or
    2. the present day value at date of leaving employment of any tax free lump sum which may be receivable from the pension scheme in the future.

      * Prior to 1/1/02 the increased exemption was 4,000.
  2. Standard Capital Superannuation Benefit - This relief benefits those with high earnings and long service. It is about 1/15th of the average annual pay for the last 3 years of service to date of leaving less any tax free lump sum entitlement from the pension scheme.
  3. Top Slicing Relief - Top Slicing is additional relief given to ensure that the lump sum payment is not taxed at a rate higher than the claimant's average rate of tax for the previous 3 years (5 years prior to 1 January 2005). This relief is claimed after the end of the tax year.

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Exemptions

  1. Statutory Redundancy Payments are exempt from tax.
  2. Payments made on account of injury or disability.
  3. Payments made when employment consists of foreign service where certain conditions are met.

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Refund of Superannuation Contributions

The standard rate of tax of 20% deducted by the pension scheme is non - refundable.

(Prior to 5/12/01 rate of tax charged was 25%)

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Where to send claim

Use your PPS number to find the postal address for your Revenue office in our contact locator.

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Reference Material

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