Severance Agreement & Tax Advice
Many times an employee discusses with an employer a parting of ways and within this context the employer proposes that a ‘Severance Agreement’ is the modus operandi for the way forward to conclude matters between the parties.
At this stage the employee is likely not to have obtained legal advice, and the employer drafts the severance agreement.
If you wish to contact us to discuss, we can be contacted on (01) 546 1121 or (052) 612 1999 or info@clearysolicitors.com
At Cleary & Co. we specialise in Employment Law and have many years of experience dealing with disputes successfully at this stage.

The employer includes a clause in the severance agreement, which is understandable, that on agreement between the parties, the employee waives all claims, actions, liabilities etc. known and unknown at the time the agreement is executed, which arise out of the employee’s employment. This includes any tax liability.
The employer gives no warranty as to the amount of Tax payable by reason of the termination payment, and no admission of any liability for breach of employment law is made by the employer in this agreement.
This employee then seeks independent legal advice to review this agreement as the employer agrees to discharge a legal cost advice fee, but not a tax advice fee.
Solicitors are not accountants or tax advisors, and it is very important that the employee gets advice from persons with the correct skillset.
There are tax exemptions for certain payments under an employment context, namely arising from S.192A of the Taxes Consolidation Act 1997, wherein an employee can be exempt from income tax, however an employee may be liable for tax when a termination payment is paid, and the severance agreement will likely disconnect the employer from any liability in this regard.
As per S.123 of the Taxes Consolidation Act 1997, there is tax treatment of payments concerning terminations of holding office, and employees can have a tax liability once a severance agreement is executed between the parties.
Many employees see the clause in a severance agreement whereby the employer may agree to discharge the legal cost fee of independent legal advice, but there is no agreement to discharge the cost of a Tax Advisor for the employee, before he/she signs the agreement.
It is of the utmost importance to obtain Tax advice and an accountant / tax advisor should be engaged by an employee to review if they have any tax liability before they sign and the severance agreement is executed, in our opinion.
Cleary & Co. Solicitors, Litigation Law Firm
Kieran Cleary and Roger Cleary Employment Law Solicitors can help with questions you may have regarding employment law matters and our numbers are (01) 546 1121 or (052) 612 1999 or our email address is info@clearysolicitors.com
Disclaimer
Please be advised that the above-mentioned material is intended as an overview and as a broad out-line of the topic discussed. It should not be considered as complete and comprehensive legal advice, nor act as an appropriate substitute. Legal advice should be obtained from a solicitor prior to relying on anything in this article.
Due care has been taken in the publication of this article and we do not accept legal liability as a result of reliance on any material covered in the above article.

Employment Law Articles
- Employment Law Ireland
- Unfair Dismissal Ireland 2024
- Protected Disclosures
- Constructive Dismissal Ireland
- Redundancy Ireland
- Bullying at the Workplace
- Workplace Harassment
- Discrimination at the Workplace
- Disciplinary Meetings & Fairness
- Deduction from Wages – Employment Law
- Dyslexia Discrimination at the Workplace
- Disability Discrimination at the Workplace
- Discrimination – Interview Process
- Disciplinary Procedure & Unfair Dismissal
- Workplace Investigations Ireland
- Age Discrimination in the Workplace
- Redundancy & Maternity Leave
- Redundancy Ireland Guide
- Redundancy Calculator Ireland
- Selection Criteria for Redundancy & Performance
- Selection Criteria for Redundancy & Genuine Consultation
- Redundancy & Temporary Lay-Offs
- Unfair Selection for Redundancy
- Redundancy & Consultations
- Redundancy Selection – Alternative Options
- Redundancy Claim Defence – Redeployment
- Retirement Ages & Discrimination
- Sick Leave & Covid-19
- Sick Pay Leave Bill
- Sick Leave & Dismissal
- Sick Pay Entitlement
- Gross Misconduct & Dismissal
- Health & Safety Unfair Dismissal
- Annual Leave Entitlement
- Calculating Loss in Unfair Dismissal Claims
- Unfair Dismissal Ireland – Probation
- Disability Discrimination Ireland
- Unfair Dismissal Claim – Employee Duty to Mitigate Loss
- Employee Verbal Warning Appeal
- Employer Delays Bullying Investigation
- Epilepsy Discrimination at the Workplace
- Disciplinary Meetings – Employment Law
- Filling out Workplace Relations Complaint Form
- Fixed-Term Employee & Pregnancy Dismissal
- Fixing Retirement Ages
- Statutory Break Entitlements
- Redundancy Selection in Ireland
- Redundancy Selection Criteria Matrix
- Time Limits – Cases
- Student Discrimination
- Severance Agreements & Tax Advice
- Terms of Employment 5 Day Rule
- Text Message & Disciplinary Meetings
- Transfer of Undertaking
- Unfair Dismissal Claim- Dismissal in Dispute
- Compensation for Unfair Dismissal
- Unfair Dismissal Claim & CCTV
- Workplace Statutory Rest Periods
- Gardai & Employment Disputes
- Gender Dismissal Discrimination
- Grievance Procedures & Constructive Dismissal
- Guide for Employees in Redundancy Selection Process
- Maternity Leave & Salary
- New Postponement Guidelines WRC
- Legal Representation at Disciplinary Hearings
- Part-Time Workers
- Plumbers & Pipefitters
- Pre-emptory Dismissal
- Pregnancy related Discrimination
- Pregnancy related Unfair Dismissal
- Proving Fairness in Unfair Dismissal Actions
- Race Discrimination in the Workplace
- Red Circling Defence
- Workplace Relations Commission
- Employment Notice Periods
- 3 Ingredients to Prove Workplace Victimization
- Christmas Bonus for Employees
- Covid-19 Force Majeure Leave
- Redundancy Ireland & Covid-19
- Defence to Disability Discrimination Claim Ireland
- Workplace Discrimination – Gender & Family Status ground
- Discrimination on a Licensed Premises
- Discrimination in Schools
- Employers Guide to Defending Unfair Dismissal Ireland
- Workplace Whistleblowing Policy
- Temporary Lay-Off & Covid 19
- Temporary Lay-off & Non-Payment of Wages
- Severance Agreement & Legal Advice
- Unfair Dismissal Claim – Mitigating Loss

Need Legal Advice? No problem. Contact Us Today!
We assist people with Employment Law matters and have many years of experience at this point resolving workplace disputes.