Section 201 Exemptions and reliefs in respect of tax under section 123

Source

Taxes Consolidation Act 1997 section 201.

(1)(a) In this section and in Schedule 3

“the basic exemption” means €10,160 together with €765 for each complete year of the service, up to the relevant date, of the holder in the office or employment in respect of which the payment is made;

“foreign service”, in relation to an office or employment, means service such that-

(i) tax was not chargeable in respect of the emoluments of the office or employment,

(ii) the office or employment being an office or employment within Schedule E, tax under that Schedule was not chargeable in respect of the whole of the emoluments of that office or employment, or

(iii) the office or employment being regarded as a possession in a place outside the State within the meaning of Case III of Schedule D, tax in respect of the income arising from that office or employment did not fall to be computed in accordance with section 71(1);

“the relevant date”, in relation to a payment not being a payment in commutation of annual or other periodical payments, means the date of the termination or change in respect of which it is made and, in relation to a payment in commutation of annual or other periodical payments, means the date of the termination or change in respect of which those payments would have been made.

(b) In this section-

“control”, in relation to a body corporate, means the power of a person to secure-

(i) by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate, or

(ii) by virtue of any power conferred by the constitution, articles of association or other document regulating that or any other body corporate,

that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person and, in relation to a partnership, means the right to a share of more than 50 per cent of the assets, or of more than 50 per cent of the income, of the partnership;

references to an employer or to a person controlling or controlled by an employer include references to such employer’s or such person’s successors.

(c) For the purposes of this section and of Schedule 3, offices or employments in respect of which payments to which section 123 applies are made shall be treated as held under associated employers if, on the date which is the relevant date in relation to any of those payments, one of those employers is under the control of the other or of a third person who controls or is under the control of the other on that or any other such date.

(1A)(a) In this subsection—

“eligible employee” means an employee, being a person who is being made redundant, who, in relation to a full-time employment, has completed at least 2 years continuous service in that employment or is, for the purposes of the law relating to redundancy, deemed to have at least 2 years continuous service;

“retraining” means a training course, made available by an employer as part of a redundancy package, that is—

(i) designed to impart or improve skills or knowledge relevant to, or intended to be used in, obtaining gainful employment or in the setting up of a business,

(ii) primarily devoted to the teaching or practical application of such skills or knowledge, and

(iii) completed within 6 months of the termination of employment;

“redundancy package”, in relation to an eligible employee, means any scheme of compensation offered to the employee on termination of his or her employment.

(b) Income tax shall not be charged by virtue of section 123 in respect of the first €5,000 of the cost of retraining an eligible employee where—

(i) such training forms part of his or her redundancy package, and

(ii) the employer makes available such retraining for all eligible employees.

(c) Paragraph (b) does not apply to any retraining provided to any or all of the spouse, civil partner and any dependant of the employer.

(d) Paragraph (b) does not apply to an eligible employee where there is an arrangement or scheme in place whereby an employee may receive the cost of retraining in money or money’s worth, wholly or partly, directly or indirectly, and such employee so receives that cost.

(2) (a) Income tax shall not be charged by virtue of section 123 in respect of the following payments:

(i) an amount not exceeding €200,000 of any payment made-

(I) in connection with the termination of the holding of an office or employment by the death of the holder, or

(II) on account of injury to or disability of the holder of an office or employment;

(ii) any sum chargeable to tax under section 127;

(iii) a benefit provided pursuant to any retirement benefits scheme where, under section 777, the employee (within the meaning of that section) was chargeable to tax in respect of sums paid, or treated as paid, with a view to the provision of the benefit;

(iv) a benefit paid in pursuance of any scheme or fund described in section 778(1).

(b) Where paragraph (a)(i) applies to any payment, or any part of a payment-

(i) the exemptions from income tax provided by virtue of any other provision of this section (other than subsection (1A)) and Schedule 3, or

(ii) any deduction in computing the charge to income tax under paragraph 6 of Schedule 3, shall not apply to the excess of any such payment.

(c)(i) Notwithstanding subparagraph (i) of paragraph (a) the amount of €200,000 referred to in that subparagraph shall be reduced by an amount equal to the aggregate amount of all payments, exempted from income tax by virtue of that subparagraph, which were paid before or at the same time as the making of the payment to which that subparagraph refers.

(ii) Where two or more payments to which subparagraph (i) of paragraph (a) applies are made to or in respect of the same person in respect of the same office or employment, or in respect of different offices or employments, for the purposes of that III: assessment) subparagraph this subparagraph shall apply as if those payments were a single payment of the aggregate amount of all such payments, and the provisions of subparagraph (i) of paragraph (a) shall apply to that single payment accordingly.

Amendments

Finance Act 2013 section 14(1)(a).

(2A) Where a payment, or any part of a payment, is not chargeable to tax under section 123 by virtue of subsection (2)(a), the person by whom the payment was made shall deliver to the inspector, not later than 46 days after the end of the year of assessment in which the payment was made, the following particulars-

(a) the name and address of the person to whom the payment was made,

(b) the personal public service number (within the meaning of section 262 of the Social Welfare Consolidation Act 2005) of the person who received the payment,

(c) the amount of the payment, and

(d) the basis on which the payment, or part of the payment, is not chargeable to tax under section 123, indicating, in the case of a payment made on account of injury or disability, the extent of the injury or disability, as the case may be.

Amendments

Finance Act 2005 section 19(1)(a).

Finance Act 2007 section 128 .

(3) Subsection (2)(a)(iv) shall not apply to the following payments-

(a) a termination allowance payable in accordance with section 5 of the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992, and any regulations made under that section,

(b) a severance allowance or a special allowance payable in accordance with Part V (inserted by the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992) of the Ministerial and Parliamentary Offices Act, 1938,

(c) a special severance gratuity payable under section 7 of the Superannuation and Pensions Act, 1963, or any analogous payment payable under or by virtue of any other enactment, or

(d) a benefit paid in pursuance of any statutory scheme (within the meaning of Chapter 1 of Part 30) established or amended after the 10th day of May, 1997, other than a payment representing normal retirement benefits, which is made in consideration or in consequence of, or otherwise in connection with, the termination of the holding of an office or employment in circumstances-

(I) of redundancy or abolition of office, or

(II) for the purposes of facilitating improvements in the organisation of the employing company, organisation, Department or other body by which greater efficiency or economy can be effected,

and, for the purposes of this paragraph, “normal retirement benefits” means recognised superannuation benefits customarily payable to an individual on retirement at normal retirement date under the relevant statutory scheme, notwithstanding that, in relation to the termination of an office or employment in the circumstances described in this paragraph, such benefits may be paid earlier than the designated retirement date or may be calculated by reference to a period greater than the individual’s actual period of service in the office or employment, and includes benefits described as short service gratuities which are calculated on a basis approved by the Minister for Finance.

(4) Income tax shall not be charged by virtue of section 123 in respect of a payment in respect of an office or employment in which the holder’s service included foreign service where the foreign service comprised-

(a) in any case, three-quarters of the whole period of service down to the relevant date,

(b) where the period of service down to the relevant date exceeded 10 years, the whole of the last 10 years, or

(c) where the period of service down to the relevant date exceeded 20 years, one-half of that period, including any 10 of the last 20 years.

(4A) Subsection (4) ceases to have effect for payments made on or after the date of the passing of the Finance Act 2013.

(5)(a) Income tax shall not be charged by virtue of section 123 in respect of a payment of an amount not exceeding the basic exemption and, in the case of a payment which exceeds that amount, shall be charged only in respect of the excess.

(b) Notwithstanding paragraph (a), where 2 or more payments in respect of which tax is chargeable by virtue of section 123, or would be so chargeable apart from paragraph (a), are made to or in respect of the same person in respect of the same office or employment, or in respect of different offices or employments held under the same employer or under associated employers, that paragraph shall apply as if those payments were a single payment of an amount equal to that aggregate amount, and the amount of any one payment chargeable to tax shall be ascertained as follows:

(i) where the payments are treated as income of different years of assessment, the amount of the basic exemption shall be deducted from a payment treated as income of an earlier year before any payment treated as income of a later year, and

(ii) subject to subparagraph (i), the amount of the basic exemption shall be deducted rateably from the payments according to their respective amounts.

(6) The person chargeable to income tax by virtue of section 123 in respect of any payment may, before the expiration of 4 years after the end of the year of assessment of which that payment is treated as income, by notice in writing to the inspector claim any such relief in respect of the payment as is applicable to the payment under Schedule 3 and, where such a claim is duly made and allowed, all such repayments and assessments of income tax shall be made as are necessary to give effect to such a claim.

Amendments

Finance Act 2005 section 19(1)(a).

(7) For the purposes of any provision of the Income Tax Acts requiring income of any description to be treated as the highest part of a person’s income, that income shall be calculated without regard to any payment chargeable to tax by virtue of section 123.

(8)(a) Notwithstanding the provisions of this section and Schedule 3, income tax shall be charged by virtue of section 123 on the amount of the lump sum which exceeds the lesser of—

(i) that part of the lump sum which, apart from this subsection, would be exempt from income tax by virtue of this section and Schedule 3, including any deduction in computing the charge to income tax under paragraph 6 of that Schedule, and

(ii) €200,000.

(b) The amount of €200,000 referred to in subparagraph (a)(ii) shall be reduced by an amount equal to the aggregate amounts exempted from income tax in respect of all payments to which section 123 applied which were paid before or at the same time as the payment of the lump sum, and shall include any deduction in computing the charge to income tax under paragraph 6 of Schedule 3.

(c) The amount determined in accordance with paragraphs (a) and (b) shall be determined without regard to subsections (1A) and (2).

(d) Where 2 or more payments in respect of which tax is chargeable by virtue of section 123 are made to or in respect of the same person in respect of the same office or employment, or in respect of different offices or employments, for the purposes of this subsection this paragraph shall apply as if those payments were a single payment of an amount equal to that aggregate amount, and the provisions of paragraph (a) shall apply to that amount accordingly.