Vol. 403 No. 8
46 Mr. Rabbitte asked the Minister for Finance if his attention has been drawn to representations made by both employer organisations and the trade union movement to increase substantially the proportion of redundancy payment which is treated as tax free; if he intends to respond to these representations; and if he will make a statement on the matter.
My Department have been unable to trace the representations referred to by the Deputy. I would point out in any event that payments on redundancy already benefit from favourable tax treatment. Statutory redundancy payments under the Redundancy Payments Acts are exempt from tax. In addition, the first £6,000 of any ex gratia payment made to an individual on termination of employment is exempt from tax, and this £6,000 may be increased to £10,000 in certain circumstances. As an alternative to the £6,000, or to the £6,000 as increased, a taxpayer may claim exemption of an amount known as the standard capital superannuation benefit (SCSB). Briefly, this is calculated as 5 per cent of the individual's average yearly salary, averaged over the last three years of service, for each year of service, less any tax-free lump sum which is received or receivable under any approved or statutory pension schemes, or which he has an option to receive in the future under such a pension scheme. Where a taxpayer's ex gratia payment exceeds the £6,000, or the £6,000 as increased, or the SCSB amount, the excess liable to tax is subject to a further measure of relief known as top-slicing relief, which ensures that it is not the taxpayer's current marginal rate of tax, but his average rate over the previous five years which is applied to the excess.
I have no plans to improve this treatment further.
