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Retirement Gratuities

Retirement Gratuities, also known as Golden Handshakes have special tax rules.

There are special tax rules for lump sum payments on retirement or on leaving your job.

There is a minimum tax-free exemption of €10,158 plus €762 for every complete year of service. This may be increased depending on the number of years you were with the company, your salary and benefits including pension scheme benefits. Where tax is due on a lump sum payment the average rate of tax you paid for the past five years may be substituted for the top rate of tax.

There is also relief available from income tax for lump sum payments made to employees under certain company restructuring schemes involving agreed pay restructuring.

RETIREMENT PLANNING

It is always prudent to plan for the future, especially to provide for income and/or capital on retirement. For employed individuals, many employers provide a company pension scheme which is funded by the individual, or the company or a combination of both. These schemes generally set the level of employer and employee funding annually, however these limits may not be sufficient to produce the income/capital you may require on retirement, especially if you wish to opt for early retirement. For tax purposes an employee can make contributions to their pension scheme of up to 15% of their employment income plus certain benefits and obtain tax relief at their marginal rate on these contributions. Any unused contributions in a tax year can be carried forward to the following years. Employees of companies which do not have occupational pension schemes must provide for themselves.

Finance Act, 1999 introduced new options on retirement for the self employed, individuals in non pensionable employment and proprietary directors. From 6 April 2000 these options are also extended to the AVC (Additional Voluntary Contribution) element of an employee pension fund.

Previously, an individual retiring had the option to take part of their accumulated retirement fund tax free (within limits) and buy an annuity with the balance of the fund which provided an income for life. On death the pension died with the individual unless provision was made for a spouses/ dependents pension. However, ultimately the capital value of the annuity was lost to the estate.




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"I run my own business and after years of struggling with a demanding home life and a hectic work schedule I reached a situation whereby I was functioning poorly with both. I’d missed a couple of VAT payments and had intended to catch up at the end of the year. I missed my own deadlines and tried again to catch-up in the following year. Business became a stressful job of ‘fire-fighting’ each day’s demands, eventually pushing the issue of outstanding taxes out of my mind as much as possible, in order to concentrate on work.

That said, you always know in the back of your mind that these things don’t just go away and that it was just a matter of time before ‘they’ catch up with you. 

After a few years of letting my compliance payments slide altogether, the Revenue made contact with me and gave me an estimate of all PAYE, VAT and tax owed over the years – which ran to over 6 figures- and they wanted the money immediately. I knew I was in big trouble and looked in the Golden pages for an accountant who could help me. The name www.fixmytax.com jumped out of the page and I made contact. I was immediately reassured that they could help me. I was asked for “every bit of paper” concerning the office and all old Revenue correspondence.

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The accountant had dealt with the Revenue directly on my behalf and he saved over 60% off the original tax bill.

Throughout the process, the fixmytax accountant was hugely supportive to me, dealt directly with the Revenue, reduced the original tax bill considerably and most importantly, had taken the fear out of the situation and given me peace of mind knowing that good progress was being made with the Revenue, rather than hiding from it all.

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My Revenue mess caused me huge amounts of anxiety all the time I did nothing to resolve it. In dealing with fixmytax, they took control of the situation and proceeded to do what had to be done. I would not hesitate to recommend them to anyone worried about any aspect of taxation and financial planning for a business.

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My most valuable lesson in dealing with fixmytax is that it is far more productive and far less stressful to get a good supportive accountant to do what they do best, leaving me free to do business. Thanks, Patrick!

Satisfied Client, name and address with firm. 

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