Aer Lingus redundancy scheme - not Revenue approved

Barnacle

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The controversial Redundancy Scheme in 2008 had not received Revenue Approval. The consequence of this, is that many recipients of the payment could face substantial tax bill. I am sure that many of those who opted for this at the time would not have done so if they thought this would happen. Makes you wonder who actually stated that the scheme qualified for Top Slicing Relief and did they even seek Revenue approval.

RT Business: Revenue queries some Aer Lingus redundancies
 


jerry springer

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I wonder who thought up this Hair-brained scheme in the first place.
This was just a compensation package for a change of terms and conditions .
Should be fun to watch if you are not a member of cabin crew.
One presumes the company is going to have to fork out for this.
I wonder what MOL the holder of 29% is going to say
 

cyberianpan

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Aer Lingus tried to give pay cuts to ex state employees... the employees got mad... so a fake redundancy scheme was concocted

cYp
 

Libero

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No joke for the employees involved, but all a bit of a laugh when one considers that the Board of Aer Lingus features such luminaries of Official Ireland as David Begg (apparently some sort of trade unionist), Ivor Fitzpatrick (reportedly a solicitor) and Michael Johns (also a solicitor).

Meanwhile, the Director of "HR and Organisational Change" is one Michael Grealy. However, it's undestandable that Michael may not have realised that the law actually applies to companies he works for, because well before he joined Aer Lingus in 2009, Michael was Head of Group HR at Bank of Ireland.

(ETA: Grealy only joined Aer Lingus after this arrangement was drafted and put into action. He still has questions to answer though, so long as Aer Lingus stands over its description of what took place.)

It really is beyond my understanding how any Irish trade union could bring itself to accept that "fire and rehire" (on lower pay) can ever bear the label of redundancy. Even with a redundancy payment involved (or not, as Revenue may decide), that's surely a red line no union can cross for fear of encouraging all sorts of employers to use fake redundancies as a device to override contracted terms and conditions. What has David Begg to say for himself other than mewling like a wet kitten that the redundacies were genuine?
 
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laidback

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No joke for the employees involved, but all a bit of a laugh when one considers that the Board of Aer Lingus features such luminaries of Official Ireland as David Begg (apparently some sort of trade unionist), Ivor Fitzpatrick (reportedly a solicitor) and Michael Johns (also a solicitor).

Meanwhile, the Director of "HR and Organisational Change" is one Michael Grealy. However, it's undestandable that Michael may not have realised that the law actually applies to companies he works for, because prior to joining Aer Lingus in 2006, Michael was Head of Group HR at Bank of Ireland.

It really is beyond my understanding how any Irish trade union could bring itself to accept that "fire and rehire" (on lower pay) can ever bear the label of redundancy. Even with a redundancy payment involved (or not, as Revenue may decide), that's surely a red line no union can cross for fear of encouraging all sorts of employers to use fake redundancies as a device to override contracted terms and conditions. What has David Begg to say for himself other than mewling like a wet kitten that the redundacies were genuine?
Brilliantly put, Libero.

How any company could proceed with an unusual scheme like this without written Revenue approval beggars belief.
 

athlonedub

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Of course the Revenue can do diddly squat if it holds up in law as an actual redundancy. That is the net point....if it is, then the tax treatment follows. So Revenue may not like it, but imho based on what I have pieced together from the radio, the issue will turn on employment law and not tax law.
 

orbit

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Apparently they did get legal advice that it was legit. But, to be honest, I wouldn't bet my house on it. If it is legal, then it's a gaping hole in tax/employment law imo.
 

gijoe

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Prima facie this 'redundancy' scheme never met the requirements for tax relief or the 60% of Statutory redundancy contribution after the changes made in the light of Irish Ferries. You have to wonder if David Begg et al expected Revenue and the Dept of Enterprise to turn a bit of a blind eye to help them out in pushing this through. And they seem to have been at least partially correct in this assumption until the DAA tried the same trick and pointed to AL when they were not getting their way.
 

Libero

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Of course the Revenue can do diddly squat if it holds up in law as an actual redundancy. That is the net point....if it is, then the tax treatment follows. So Revenue may not like it, but imho based on what I have pieced together from the radio, the issue will turn on employment law and not tax law.
Yes, but ultimately that will mean employment law regarding redundancy as interpreted by the superior courts, not by some labour forum set up under a social partnership agreement.

I'm no expert on employment law, but if a person is "made redundant", but immediately rehired and does largely the same job, how is that a genuine redundancy? Same goes if the person is rehired to another role as part of an overall scheme where another person moves to their old role, i.e. the old role is not extinguished.

Like laidback said, arguments aside (and even if they manage to win the case) it's positively bonkers that Aer Lingus went ahead with this without written Revenue approval.
 
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Making someone supposedly redundant and taking back into same company in similar type role on reduced salary should always be taxable. Otherwise it becomes a way for companies to reward people while not paying tax.

I don't see revenue backing down on it so going to be lots of tax payabale.
 

Barnacle

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All payment made by employers to employees are subject to tax law. The appropriate tax should have been paid, if due, when the payments were made. If the employer paid these out gross, and there was no tax legislation to allow this, then they should have applied and obtained Revenue approval prior to payment. By all accounts, the payments were paid gross without approval therefore they were paid on the presumption that tax liabilities were covered within Tax Law or on the basis of advice from someone.

These payment really constitute buy-out of contract and would be taxable. I wonder did Aer Lingus also get the 60% rebate. If so, this may also have to be repaid.
 

HarshBuzz

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knowing the mania at the time, many of these AL employees probably put their 'windfall' into property

they'd have been feeling nauseous over the cornflakes this morning
 

athlonedub

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All payment made by employers to employees are subject to tax law. The appropriate tax should have been paid, if due, when the payments were made. If the employer paid these out gross, and there was no tax legislation to allow this, then they should have applied and obtained Revenue approval prior to payment. By all accounts, the payments were paid gross without approval therefore they were paid on the presumption that tax liabilities were covered within Tax Law or on the basis of advice from someone.

These payment really constitute buy-out of contract and would be taxable. I wonder did Aer Lingus also get the 60% rebate. If so, this may also have to be repaid.
You are assuming of course that all tax legislation is interpreted in the same way by the Revenue and the tax payer !

While it is not my specific area of expertise, it does seem that the net point is whether or not it fitted within the provisions of Section 123 Chapter 5 Part 5 Taxes Consolidation Act 1997 (as it interacts with Section 201 Chap 1 Part 7 of the same Act). The company clearly believed it was within its rights to pay gross and as I have already pointed out, I'd be pretty sure this will turn on employment law and not tax law. If it was a bona fide redundancy within the labour law definition, then I think the Revenue are on extremely shaky ground in challenging. The converse would also hold.

The same would also hold on the DETI 60% rebate.


....and as a general point, the Revenue are not always right you know!
 

athlonedub

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I don't see revenue backing down on it so going to be lots of tax payabale.
That is a non sequitor ! As a general principle, just because Revenue don't "back down" on something does not automatically mean there is tax payable !

My gut tells me there may be a bit of stable door bolting after this one.......
 

consultant

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Making someone supposedly redundant and taking back into same company in similar type role on reduced salary should always be taxable. Otherwise it becomes a way for companies to reward people while not paying tax.

I don't see revenue backing down on it so going to be lots of tax payabale.
I don't believe it.

For once, I agree with you, Odie.

It certainly will be interesting to see what Revenue does. Particularly in an environment where they are accommodating employers by allowing them (employers) off-set the 60% of statutory due to the employer against outstanding VAT and tax.
 

westcork

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Where the new Jobs advertised after the redundancies took place.

Did "Canvassing will disqualify" apply !!!!!!!!!!!

How many new employees were taken on.
 

Barnacle

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You are assuming of course that all tax legislation is interpreted in the same way by the Revenue and the tax payer !

While it is not my specific area of expertise, it does seem that the net point is whether or not it fitted within the provisions of Section 123 Chapter 5 Part 5 Taxes Consolidation Act 1997 (as it interacts with Section 201 Chap 1 Part 7 of the same Act). The company clearly believed it was within its rights to pay gross and as I have already pointed out, I'd be pretty sure this will turn on employment law and not tax law. If it was a bona fide redundancy within the labour law definition, then I think the Revenue are on extremely shaky ground in challenging. The converse would also hold.

The same would also hold on the DETI 60% rebate.


....and as a general point, the Revenue are not always right you know!

I know all too well that the Revenue are not always right.

As I also said, Aer Lingus seem to have paid this out on the presumption that this was covered. They must have done this on advice, but what advice and who gave it. If it is deemed a genuine redundancy then there may not be an issue. As this was a collective agreement for pay restructure with the employer and the Union, Section 202 of the TCA may come into play but that is limited.
 

He3

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What are we paying her for really? Decisiveness? Management? Being in charge?

Tánaiste Mary Coughlan has said the Department of Enterprise has not yet decided whether or not the so-called 'leave and return' scheme introduced at Aer Lingus two years ago qualifies as redundancy

RT News: Dept unsure over Aer Lingus redundancies
 

timmy1

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What if you are took your redundancy and was then re-employed in the same position but as a Contractor with responsibility for paying your own taxes ? Now you are no longer a paye worker and the tax repayment issue doesnt arise. Anyone have views on this.
Timmy
 


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