This resolution gives effect to the budget decision that top-slicing relief will no longer be available from 1 January 2013 on ex gratia lump sums paid to employees and officeholders in respect of either redundancy or termination of employment, where the non-statutory element of the payment is €200,000 or more. Top-slicing relief applies the average effective rate of tax for the previous three tax years applicable to an individual taxpayer to the taxable element of any ex gratia payment received from an employer on cessation of an employment. In this way, while the taxable element of the lump sum payment is added to increase the individual’s overall income for the year of assessment, the rate of tax applied to that taxable element of the payment will be the average effective rate rather than the marginal rate of tax in force for that year. The claim for top-slicing relief is made at the end of the year of assessment and is allowed as an additional credit in the computation of final liability. The resolution makes a change in Schedule 3 to the Taxes Consolidation Act 1997 by inserting a new paragraph 12A into the Schedule. The new subparagraph (a) provides that, with effect from 1 January 2013, any payment of an ex gratia amount to which section 123 applies which is of an amount of €200,000 or greater will not qualify for top-slicing relief. The calculation of this relief is set out in paragraph 10 of the Schedule. The subparagraph (b) provides that where two or more payments are made in respect of the same person, or in respect of the same office or employment, or where two or more payments are made in respect of different offices or employments, the amounts will be aggregated for the purposes of determining whether the limit of €200,000 has been breached. This restriction is a separate and distinct provision from the lifetime limit of maximum amounts of exemptions and reliefs that a taxpayer can claim in respect of ex gratia payments made to him or her which was introduced in Finance Act 2011. For example, an individual can receive a severance payment which is in excess of €200,000 and his or her reliefs in respect of exemptions provided for in section 201 of the Taxes Consolidation Act 1997 will be allowed up to the maximum lifetime entitlement. However, as the quantum of the severance payment equals or exceeds the amount of €200,000, he or she will not be entitled to claim top-slicing relief when his or her affairs are subsequently reviewed by Revenue.

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