Vol. 504 No. 5
125 Mr. N. Ahern asked the Minister for Finance the reason PAYE allowance has not been given to the self-employed; if directors and family of company directors receive the benefit; the number of self-employed excluded; the annual cost if it was granted to them; and if he will make a statement on the matter. [12459/99]
Entitlement to the PAYE allowance is governed by section 472 of the Taxes Consolidation Act, 1997 – TCA 1997. The PAYE allowance, currently £1,000 at the standard rate, is available to ordi nary employees. It is not available to the self-employed, proprietary directors, or the spouses of those two groups when employed in the business. Section 472 defines a proprietary director as "a director of a company who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control, more than 15 per cent of the ordinary share capital of the company."
The 1994 Finance Act extended the PAYE allowance to children of the self-employed, including farmers, and of proprietary directors who are genuinely employed in their parent's business. The conditions determining such genuine employment, which are set out in section 472, include a requirement that the person be required to devote substantially the whole of their time to the employment throughout the relevant tax year, and also that the amount paid in respect of the employment should be not less than £3,600 per year.
The self-employed and proprietary directors, who are the self-employed in an incorporated form, and their spouses do not receive the PAYE allowance because, despite the changes to a current year basis of assessment, it is considered that they still enjoy a more favourable tax regime than ordinary PAYE workers.
It is estimated that the total number of self-employed, proprietary directors and wives assisting currently excluded from the PAYE allowance is 216,400, of whom 150,000 are self-employed or spouses assisting self-employed. It is estimated that extending the PAYE allowance to the self-employed, proprietary directors and their spouses, would cost a minimum of £52 million and up to £76 million depending on the extent to which there was an increase in the number of spouses assisting in the family business in order to avail of the PAYE allowance.
