748. Deputy Cian O'Callaghan asked the Tánaiste and Minister for Finance if his Department has examined whether the receipt of taxable benefits-in-kind during periods of unpaid statutory maternity leave, particularly relating to employer-provided health insurance, prevents employees from availing of the look-back provision when calculating average earnings for the standard capital superannuation benefit; the Revenue Commissioner’s criteria for determining when the look-back mechanism may be applied; and if he intends to review the relevant guidance to ensure that the treatment of unpaid leave and taxable benefits does not inadvertently disadvantage employees who take statutory maternity leave. [56601/26]

Where an ex-gratia payment is chargeable to tax under Schedule E by virtue of section 123 of the Taxes Consolidation Act (TCA) 1997, the payment may qualify for relief or exemption from tax under section 201 and Schedule 3 TCA 1997 as follows:

Basic exemption - a tax free amount of €10,160, plus €765 per complete year of service.

Increased basic exemption - the basic exemption amount may be increased by an additional €10,000, which is available where an individual has not claimed any exemptions under section 201 TCA 1997 in the previous 10 years and is not a member of an occupational pension scheme.

Standard Capital Superannuation Benefit (SCSB) - this is calculated as outlined below.

These reliefs / exemptions are subject to a lifetime limit of €200,000 and the individual may apply whichever of the three is more beneficial to them.

SCSB is a relief from income tax arising from a lump sum payment connected with the termination of an employment. SCSB is calculated by multiplying 1/15th of the employee's annual taxable emoluments, averaged over the last three years (i.e., 36 months) of his or her service, by the number of complete years of service with the employer, and deducting any tax-free lump sum received or receivable under any pension scheme.

Revenue allows the period of service for the SCSB calculation to be extended where periods of unpaid leave are taken and during that period no “taxable emoluments” are paid from the employer to the employee, such as periods of unpaid maternity leave.

Under section 112 of TCA 1997, “emoluments” means anything which is assessable to income tax under Schedule E (e.g. salary, commission, overtime, notional pay, etc.). All payments made by employers to employees and office holders are regarded as "pay" for tax purposes, and in the absence of a specific relief or exemption, employers must operate PAYE on such payments.

Based on the circumstances outlined by the Deputy, where an employer provides the cost of medical insurance on behalf of an employee during periods of unpaid leave, the amount paid by the employer is subject to Income Tax as a benefit in kind under Schedule E by virtue of section 118 TCA 1997. Such a benefit is considered a taxable emolument and as a result is included in the calculation of the average taxable emoluments figure for the final three years of service for SCSB purposes. The payment of the medical insurance premium by the employer means that the period(s) of statutory maternity leave are not considered period(s) where there were no “taxable emoluments”, and the amounts paid for the medical insurance are “taxable emoluments” taken into account for the SCSB calculation, in accordance with Schedule 3 TCA 1997.

Further information on the taxation of termination lump sum payments can be found in Revenue’s Tax and Duty Manual Part 05-05-19 Payments on Termination of an Office or Employment or Removal from an Office or Employment which can be accessed on Revenue’s website.