Emmet Stagg (Kildare North, Labour)
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Question 317: To ask the Minister for Finance the amount of redundancy payment which was exempt from taxation in 1997 and in each year up to 2006. [15189/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Under section 203 of the Taxes Consolidation Act 1997, statutory redundancy payments are free of income tax. Statutory redundancy payments amount to two weeks pay per year of service plus a bonus week subject to a maximum payment of €600 per week. This figure was put in place with effect from 1 January 2005. Previously, a maximum payment of £400, equivalent to €507.90, applied from 1 April 2001 and, before that again, an amount of £300, or €380.91, had been in place since the early 1990s. The payments apply to employees in insurable employment between the ages of 16 and 66 with two years' continuous service. With the implementation of commitments contained in Sustaining Progress, distinctions on age grounds which existed for the purpose of calculating entitlements have been abolished.

Ex gratia redundancy payments in excess of the statutory redundancy amount may also be free of income tax to the extent that they are covered by tax exemptions or reliefs. Section 201 of the TCA 1997 provides for an exemption from taxation of the higher of the basic exemption or the standard capital superannuation benefit. For payments made between 1 January 1997 and 31 November 1998, the basic exemption is calculated as £6,000, or €7,618, plus £500, or €635, for each full year of service. For payments made between 1 December 1998 and 31 December 2001, the basic exemption is calculated as £8,000, equivalent to €10,158, plus £600, or €762, for each full year of service. As respects payments made after 1 January 2002, the basic exemption is calculated as €10,160 plus €765 for each full year of service.

In addition, the basic exemption may be increased by an additional amount of up to €10,000 in a case where an individual is not a member of an occupational pension scheme or irrevocably gives up the right to receive a lump sum from such a scheme, or is a member of a such a scheme where the actuarial value of any lump sum entitlement from the scheme is less than €10,000. The additional amount was introduced in the Finance Act 1980 at a value of £4,000, or €5,080, and remained at that level until the end of 2001. Since 2002, the value of the additional amount has been €10,000. Prior to 2002, it was only available in the case of a first redundancy. However, this restriction was eased in the Finance Act 2002 and the additional amount may now be availed of by an individual every ten years.

The standard capital superannuation benefit, SCSB, generally benefits those with high earnings and long service. It is calculated at 1/15th of the average yearly salary, averaged over the last three years of service, per complete year of service, less any tax free lump sum which is received or receivable under any approved or statutory pension scheme, or which the individual has an option to receive in the future under such a pension scheme. The structure of SCSB has not changed since 1997.

If an employee is liable to tax on any of his or her ex gratia redundancy payment an additional relief known as "top slicing relief" may be due. This means that any amount liable to tax is charged, not at the taxpayer's marginal rate for the year in which the payment is made, but at an average tax rate calculated by reference to the previous three years. Prior to 2005, the average tax rate was calculated by reference to the previous five years. Top slicing relief can only be claimed by way of repayment after the end of the year of assessment.