Dáil Éireann Debate, Tuesday - 22 February 2022
243. Deputy Sorca Clarke asked the Minister for Finance the number of applications for exemption from income tax in respect of certain payments made under employment law as updated in May 2021; the number of applications approved; the number refused and the number granted upon appeal by the relevant Act in each of the years 2018 to 2021, in tabular form; and if he will make a statement on the matter. [9600/22]
View answerIt is my understanding that the Deputy is referring to section 192A of the Tax Consolidation Act 1997, which deals with exemptions in respect of certain payments made by employers to employees arising from claims under employment law.
Section 192A provides that compensation payments made to an employee will be exempt from income tax, universal social charge and PRSI in instances where the employee’s statutory rights or entitlements, or an employer’s obligations under employment legislation, have been infringed or breached.
The exemption provided for by section 192A applies to payments arising out of claims made under a “relevant Act” following a formal hearing before a “relevant authority”, on foot of a recommendation, decision, or determination by that relevant authority. The exemption also applies to payments made under an out of court settlement, in place of a formal hearing before a relevant authority, which has been agreed between an employee and his or her employer, subject to certain conditions being met.
I am advised by Revenue that its Tax Duty Manual Part 07-01-27 - Exemption from Income Tax in respect of Certain Payments made under Employment Law offers extensive guidance on the application of this exemption.
The update in May 2021 referred to in the question relates to an amendment to the aforementioned Tax Duty Manual, where paragraph 4 “Out of Court Settlements” was updated to outline on what information should be included in such a settlement agreement and the format it should take – “the format of the employee’s original statement of claim, which must be evidenced in writing, and the details to be included in same, will vary depending on the facts and circumstances of each individual case. However, such written documentation may reasonably be expected to include information such as the nature of the claim, the nature of the relationship between the parties involved or a high-level summary of the allegations and the impact of same. The employee need not engage an external advisor to prepare such written documentation on their behalf and there is no requirement for the statement of claim to have been formally submitted to a relevant Authority, provided all other conditions set out above are met.”
Where payments are made under the provisions of section 192A, generally a self-assessment approach applies and Revenue approval is not obligatory. However, it is possible for an employer to seek Revenue approval if there is any doubt as to the application of the exemption. As there is no formal application or approval process, Revenue advise that the details requested are not available. However, it is important to note however, that where such payments to employees are encountered during the course of a Revenue compliance intervention, details of the payment would be examined to ensure they meet the requirements of the legislation.
