Awarded compensation for Unfair Dismissal - is it taxable?

[maebee]

My niece was today awarded €10,000 compensation by the Rights Commissioner for unfair dismissal. She was told that she will have a cheque within the next fortnight but she forgot to ask if this amount will be taxable. Can anybody advise please? Thanks.

 

[sean.c]

It depends and it looks fairly complicated;

[broken link removed]

As far as I can make out, a straight-forward award is not taxable. However, any element of the award that may be considered salary due, is taxable as normal.

ie. say your daughter was award 2k in salary, and 8k in compensation. The 2k would be taxable.

I THINK! the leaflet isn't at all clear. Best to consult the taxman when teh award comes through.

sean.

 

[maebee]

Thanks for the reply Seán. We looked at the revenue site and we also found it confusing. None of the award is salary. She was given her final salary & P45 in December. Although the Rights Commissioner also awarded her re-instatement, she won't be returning to that job. Guess we'll have to wait til the cheque arrives. Thanks again for taking the time to reply.

 

[Stephen Casey]

I won my unfair dismissal case I had very little loss of wages but the company deducted emergency tax and all the other charges and I only ended up with half of the payment

 

[dublin66]

My understanding is that unfair dismissal payments are for loss of earnings and are therefore taxable. However it is a payment arising from loss of employment so that the statutory reliefs apply. Basic, increased exemption and SCSB should be available. The title of the Revenue leaflet is misleading in that it also applies to resignations, dismissals etc.
IT21 - Lump Sum Payments (Redundancy/Retirement)