Eoghan Murphy (Dublin South East, Fine Gael)
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335. To ask the Minister for Finance the Revenue Commissioners' views on a matter (details supplied) regarding a redundancy situation. [22153/15]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that all amounts paid to an employee by an employer in connection with an employment are fully liable to income tax and this includes any specific amounts, however described, in an employment contract.

As such, where an employment contract provides specifically for the payment of a sum on termination of employment, such an amount is fully within the charge to income tax.

An ex-gratia payment made on retirement or removal from an employment is generally made outside the terms of an employment contract and benefits from favourable tax treatment.

Should the company in question introduce a specific condition into its employment contracts to provide for specified payments on terminations, such payments will be fully taxed and will not benefit from the more favourable tax treatment available for ex-gratia payments.

Were these provisions to be amended, this could lead to employers and employees amending the terms of contracts to provide for reduced salaries and higher termination payments with a view to minimising income tax payable.  I therefore do not propose amending the current provisions.

In the United Kingdom the Revenue authorities may take the view that a redundancy payment is to be treated as earnings and, therefore, taxable. This will depend on the legal basis giving rise to the payment and will depend on the circumstances of each case.