Severance package

Auguste Comte

How is a severance package treated for tax purposes?

For example, to keep it simple, say a single person, top rate tax payer with just the basic tax free allowance was to get a €100,000 package how much could they reasonably expect to bring home.

Are there ways to do a Bono manage or reduce the tax liability or claim any back after leaving the employment?

Would setting up your own small business have any effect on the situation?

Sorry if the questions are a bit thick but I am completely thick when it comes to tax matters and thanks for any info.

A C..

Lockedout2

Statutory redundancy is exempt so that about €1,200 per year worked.

Then there are three exemptions

The basic €10,160 plus €765 per year.

The increased basic the basic above plus €10,000 less the Net Present VAlue of pension tax free lump sum.

The SCSB the average salary for the last theee years x no. Of years service / 15 less the Net Present VAlue of pension tax free lump sum.

So the question is what is the NPV of your tax free lump sum.

The J Stands for Jay

Lockedout2 wrote: »

So the question is what is the NPV of your tax free lump sum.

You can waive your right to a lump sum to increase the tax exemption, but it'd need to make sense financially for you. Of course there may be ways to 'Bono' that waiver to get the tax-free lump sum from the pension.

amtc

I think this could be confusing. In my case I got statutory plus 9 weeks per year. My pension is completely separate...left as is

exaisle

You could get the portion of your redundancy that would be taxable in your hands, paid directly into your pension by the company....

Lockedout2

Your pension is relevant as the NPV is part of the calculation of the exempt part of your termination payment.

Auguste Comte

Hi, thanks for all the answers, plenty of research to be done. Just for clarity this would be severance not redundancy, I had no idea a pension Could be used to reduce the tax liability. I'm guessing some professional financial advice would be the way to go if an offer is attractive enough.

All information or pointers to research material welcome.

Thanks again.

Mrs OBumble

Auguste Comte wrote: »

Hi, thanks for all the answers, plenty of research to be done. Just for clarity this would be severance not redundancy,

From an employment law perspective, I don't know if there's a difference: the only way you can legally be paid to leave is if your position is made redundant. Of course in practise there's a difference, people are paid off to leave and say nothing all the time. But you need to get the legals straight to get the tax straight.

Definitely seek professional tax advice if you are considering setting up a small business with the proceeds: there's a relief that applies to this, and structuring things correctly for it is important. Also good legal advice to make sure there's no restraint of trade clauses in your redundancy / severance agreement.