Query re: to which tax year earnings should be applied

Dumblonde

Hi,

I opted to take redundancy from my job at the end of Dec. 2010. Due to a royal mess-up by my former employer I did not receive my actual redundancy payment until June 2011. Unfortunately I have not worked at all during 2011 and drew unemployment benefit. Therefore my only 'earnings' during 2011 is my redundancy payment.

My question is this - can I claim back the tax portion of the redundancy payment (which is by the way under the single person tax threshold) as I have not other earned income in 2011.

The tax office insist that it pertains to 2010 and therefore can only be counted with my income from that year. However, I always understood that the date when earnings accrued decides the tax applicable to them - not to the period to which they 'refer'. I have received some fairly poor service and advice from this particular tax office in the past and therefore my levels of trust in their view of this issue is not high.

Anybody out there with some tax knowledge - I would be grateful for your advice.
Thanks - Dumblonde

KCTK

Dumblonde wrote: »

Hi,

I opted to take redundancy from my job at the end of Dec. 2010. Due to a royal mess-up by my former employer I did not receive my actual redundancy payment until June 2011. Unfortunately I have not worked at all during 2011 and drew unemployment benefit. Therefore my only 'earnings' during 2011 is my redundancy payment.

My question is this - can I claim back the tax portion of the redundancy payment (which is by the way under the single person tax threshold) as I have not other earned income in 2011.

The tax office insist that it pertains to 2010 and therefore can only be counted with my income from that year. However, I always understood that the date when earnings accrued decides the tax applicable to them - not to the period to which they 'refer'. I have received some fairly poor service and advice from this particular tax office in the past and therefore my levels of trust in their view of this issue is not high.

Anybody out there with some tax knowledge - I would be grateful for your advice.
Thanks - Dumblonde

Hi unfortunately the tax office is correct, it is taxable in the period you left employment, not when you actually received the payment. See this link under "When is lump sum taxed" http://www.revenue.ie/en/tax/it/leaflets/it21.html#section6

Dumblonde

Hi,

Thanks for that pointer, I missed that. I suppose what is rather confusing is that my former employer applied USC (payable since 1st Jan, 2011) to it as well and there appears to be no mechanism for reclaiming that at present. It does seem a bit of 'having cake and eating it too' by Revenue. If the payment is taken to refer to 2010 then surely that year's tax rules should apply?

Mr. Incognito

There are a number of Cases on this,

For the tax nerds it is in the footnotes in relation to the Schedule E charge section in the TCA

Sch E Payments are taxable in the year to which they relate and not when they are paid.

If USC was applied you are entitled to a full refund of same that was applied at the 2011 rates but you will have to pay the income and health levy and income tax in it at 2010 rates

namenotavailablE

Re USC and redundancy payments: see pgh 1.11 on page 15 of this document

Also, pgh 2.22 on page 22 might be of interest to you.

Dumblonde

Many thanks for responses Mr Incognito and NameNotAvailabl.

I still have a long road with this one as revenue have requested info from my former employer before I can get tax back and my Top Slicing Relief. It is going to be incredibly difficult to get them to respond, already another 3 months has passed on this particular query. The Tax Office just told me the ball is in the employer's court.
One thing I do wonder about - does Revenue have the power to sanction an employer who unduly delays providing information? My former employer is an enormous state body, but in this case I really think that Revenue is not performing on behalf of their customer (ie. me). I'm going to contact the Ombudsman's office to see if this is within their remit.