Taxes Consolidation Act 1997 section 192A

Exemption in respect of certain payments under employment law

Section 192A exempts from income tax certain compensatory payments made to employees or former employees where their statutory employment rights have been infringed or breached by an employer.

• Compensation payments made under employment protection legislation, following a recommendation, decision or determination by a relevant authority such as the Workplace Relations Commission, the Labour Court or the courts, are exempt from income tax with effect from 4 February 2004.
• The exemption extends to payments arising from mediation processes provided for in employment legislation, and to qualifying out-of-court settlements between unconnected parties, provided the settlement is evidenced in writing, relates to a bona fide claim, and does not exceed the maximum amount a relevant authority (other than the Circuit Court or High Court) could have awarded.
• The exemption does not apply to any element of a payment that represents remuneration (including arrears of remuneration), termination payments within section 123(1), change-of-work payments within section 480(2)(a), or compensation under section 2B of the Employment Permits Act 2003.
• Employers must retain copies of the settlement agreement and statement of claim for six years from the date of payment and must make these available to a Revenue officer on request.