Revenue Note for Guidance

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Revenue Note for Guidance

192A Exemption in respect of certain payments under employment law

Summary

The section exempts from income tax compensatory awards where an employee’s rights and entitlements in law have been infringed or breached, for example, through discrimination, harassment, victimisation or plain non-compliance by an employer with statutory requirements. The exemption will apply to payments arising out of formal hearings before the relevant authorities for the purposes of the relevant legislation. The exemption extends to such payments made following mediation processes provided for in the law. In addition, it will, subject to conditions, also apply to payments under an “out of court” settlement which has been agreed between an employee and his or her employer in place of a formal hearing of a relevant authority.

However, payments made under law to an employee which is in respect of remuneration, changes in functions or procedures of an employment or the termination of an employment will continue to be taxable in the normal way.

Details

Definitions

The terms “relevant Act” and “relevant authority”. are defined. “Relevant Act” means an enactment which contains provisions for the protection of employee’s rights and entitlements or for the obligation of employers towards employees. In addition to the more obvious statutes e.g. the Employment Equality Act, 1998 and the Maternity Protection Act, 1994 it would also cover Acts such as the Protections for Persons Reporting Child Abuse Act, 1998 and the Competition Act 2002 which provide for compensation for employees who are victimised for making reports under those Acts.

“Relevant authority” lists the various persons and bodies responsible for dealing with claims or disputes under relevant Acts.

Application of section

Subject to the following, the section applies to payments made, on or after 4 February, 2004 to an employee (or former employee) by his or her employer (or former employer) arising out of a recommendation, decision or determination of a relevant authority under a relevant Act.

Mediation processes

Payments arising out of a mediation process provided for under a relevant Act (e.g. section 78 of the Employment Equality Act 1998) are to be treated as if they had been made following a recommendation, decision or determination under that Act of a relevant authority.

Out of Court Settlements

Without prejudice to any of the terms or conditions of a settlement, the section also applies to a payment under certain “out of court” settlements. To qualify, a settlement must comply with the following conditions:

  1. it must be an agreement evidenced in writing between unconnected persons (within the meaning of section 10), in settlement of a claim—
    1. which is a bona fide claim made under the provisions of a relevant Act,
    2. which is evidenced in writing, and
    3. which had the claim not been settled by the agreement, is likely to have been the subject of a recommendation, decision or determination under that Act by a relevant authority that a payment be made to the person making the claim,
  2. the amount of the payment under the settlement does not exceed the maximum payment which, in accordance with a decision or determination by a relevant authority (other than the Circuit Court or the High Court) under the relevant Act, could have been made under that Act in relation to the claim, had the claim not been settled by agreement, and
    1. copies of the agreement and the statement of claim are kept and retained by the employer, by or on behalf of whom the payment was made, for a period of six years from the day on which the payment was made, and
    2. the employer has made copies of the agreement and the statement of claim available to an officer of the Revenue Commissioners where the officer has requested the employer to make those copies available to him or her.

On request, an employer is to make available to a Revenue officer all copies of —

  1. such agreements as are referred to in paragraph (a) entered into by or on behalf of the employer, and
  2. the statements of claim related to those agreements,

kept and retained by the employer in accordance with subparagraph (iii) of that paragraph. The officer may examine and take extracts from or copies of any documents made available to him or her under this subsection.

Non application of section

The section does not apply to so much of a payment under a relevant Act or an agreement referred to in subsection (4) as is —

  1. a payment, however described, in respect of remuneration including arrears of remuneration, or
  2. a payment referred to in section 123(1) or 480(2)(a).

Employment Permits Act 2003

(5A) Section 192A exemption does not apply to compensation payments made under a court order under Section 2B of the Employment Permits Act 2003.

Exemption

Payments to which the section applies are exempt from income tax and not reckoned in computing total income for the purposes of the Income Tax Acts.

Relevant Date: Finance Act 2021