Willie Penrose (Longford-Westmeath, Labour)
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Question 207: To ask the Minister for Finance if an [i]ex gratia[/i] sum payment which is payable to employees who take redundancy is subject to income tax; the position regarding same; and if he will make a statement on the matter. [7009/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Statutory redundancy payments are exempt from income tax. In addition, ex-gratia redundancy payments in excess of the statutory redundancy amount are exempt from income tax up to certain limits namely -

· a basic exemption of €10,160 plus €765 per complete year of service in excess of the statutory redundancy;

or

· Standard Capital Superannuation Benefit i.e. 1/15th of the person's annual income (average of the last three years) for each year of employment less any tax-free lump sum which is received or receivable under any approved or statutory pension scheme.

The basic exemption from income tax as outlined above can be further increased by up to €10,000 if the person is not a member of an occupational pension scheme. This can only be claimed if the person has not made any claims in respect of a lump sum received in the previous 10 tax years. It is open to the taxpayer to choose whichever relief is of most benefit. Any amount of redundancy payment in excess of whichever exemption applies, is liable to income tax.