Below we have outlined the potential tax-free elements for lump sum payments received on termination of office or employment:

Basic Exemption:

The basic exemption is €10,160 plus €765 for each complete year an employee has worked for the company. The following items can be counted towards a full year’s work:

• Time worked before and after a career break
• Period of job-sharing or part-time work
• For group companies, all work carried out in Ireland.

If your employee has taken a career break this cannot be counted.

Increased Exemption:

You may claim an increased exemption, up to €10,000, providing you have not received a lump sum payment in the previous ten years. You may be due to receive a lump sum payment from their pension scheme. You must deduct this lump sum from the €10,000.

If this payment is not due yet, then you deduct the current value of it.

You might have agreed with the pension provider that you will never receive a lump sum payment. You must inform your employer of this agreement in order to receive the increased exemption.

Standard Capital Superannuation Benefit (SCSB):

SCSB is an additional relief you may be entitled to. It benefits employees with high earnings and long service. SCSB is calculated at 1/15 of the average annual pay for the last 36 months in employment. This is multiplied by the number of full years of service. Any tax-free lump sums received are subtracted from the benefit.

Payment in Lieu of Notice:

A payment in lieu of notice should be treated as pay if it is part of an employee’s contract. This payment cannot benefit from the basic exemption.

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