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Alan, A client employs a person on a contract that is due to expire at the end of Sept. They are proposing to let them go in July and pay the balance of the contract approx €6k as an ex gratia payment. Is this liable to PAYE and can we make it more tax efficient for the employee by treating it as a breach of contract. Thanks, John.

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Posted by (Questions: 15, Answers: 0)
Asked on 20 May 2014 10:50 am
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It is liable to PAYE – all termination payments are automatically caught by TCA 1997 s 123 unless exempted by TCA 1997 s 201. For a payment to be exempted it would need to be proportionate to the time served etc. Making it a breach of contract sounds like the type of tax avoidance that might fall foul of https://www.taxworld.ie/legislation/TCA1997/current/811 TCA 1997 s 811] that Revenue could see through.

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Answered on 26 May 2014 9:04 am