Lump Sum Payments made to an employee as compensation for change in working procedures
This applies to any payment chargeable to tax under Schedule E that is made to an employee to compensate him/her for:
- A reduction or possible reduction of future remuneration arising from a reorganisation of the employer's business, e.g., a loss of promotional prospects, with attendant loss of possible higher earnings
- A change in working procedures or working methods. Examples might be the introduction of new technology or agreed changes in working methods
- A change in duties, e.g., a machinist agreeing to load raw materials or to pack the finished product or a bus driver agreeing to operate a 'one-person' bus
- A change in the rate of remuneration, e.g., the introduction of a (higher) basic salary in substitution for a basic salary and commission
- A transfer of the employee's place of employment from one location to another.
Payments excluded from this relief are lump sum payments made to directors and employees with proprietary interests or to part-time directors and part-time employees.
This relief is claimed after the end of the tax year.
The relief is such as to reduce the total income tax for the year of assessment to:
- the income tax which would have been payable by the employee if he/she had not received
the lump sum,
- tax on the whole of the lump sum computed at a special rate (an effective rate on the payment if one third only of the lump sum was paid).
Note that no tax relief arises where the special rate equals the employee’s highest income tax rate in the year the lump sum was paid.
Written claim required.
Evidence that any of the above items have happened, i.e., a statement from the employer.
Section 480 TCA 1997.