I propose to take Questions Nos. 193, 194 and 204 together.
The position on the tax treatment of payments received under the various income support schemes has been clearly communicated effectively since they were introduced in 2020 in response to the covid-19 pandemic. Payments made under the Temporary Wage Subsidy Scheme (TWSS) and Pandemic Unemployment Payment (PUP) are income supports and share the characteristics of income. They are therefore liable to income tax as is the general position that applies to social welfare payments.
Similar to other income earners whose pay was not subsidised by the State, including those on comparable wages, TWSS payments were also subject to USC.
It is noted, however, that a zero rate of PRSI applied for the purposes of employee PRSI contributions under the TWSS while the PUP is exempt of PRSI, as is also the case for regular social welfare payments.
An additional exemption being made to such payments would raise questions around equity and it is therefore appropriate that payments made under the TWSS and PUP are subject to tax.
Tax was not collected in real-time through the PAYE system while the schemes were in operation. Instead, liability to tax has now been calculated by Revenue through the regular end of year review process. This decision was taken in order to maximise the amount of financial support that was provided to recipients at a time when it was considered that they needed such support most, when the TWSS was first announced and expected to only be in place for 12 weeks.
When the TWSS was extended for a further 10 weeks until the end of August 2020, Revenue took steps to minimise the amount of income tax and USC due, if any, on TWSS payments at the end of the year. This was done by placing all recipients of the TWSS or PUP on the ‘week 1 basis’ of taxation for the remainder of the year so as to “preserve” unused tax credits that can then be used to offset any income tax or USC liabilities that arise at year end.
The Employment Wage Subsidy Scheme (EWSS) replaced the TWSS from 1 September 2020 and re-established the normal requirement to operate PAYE on all employee salaries, providing for the regular deduction and remittance of income tax, USC and employee PRSI.
In terms of the total outstanding from the 2020 tax year, the final calculation of the end of year liability for each person is dependent on their personal circumstances. However, based on data that Revenue released in January, almost half of those in receipt of the PUP or TWSS have no outstanding liability to discharge, and in in fact over a third are due a refund worth an estimated total of around €151 million.
In the case of the remaining taxpayer units with an outstanding liability, the data indicate that the total amount outstanding from those in receipt of either the TWSS or PUP (or both) is around €335 million. It is noted that amounts to be collected are modest in scale, with 44% owing less than €500 and 72% having a liability of less than €1,000. If paid over the 4 year period beginning in 2022, the majority of those cases will owe less than €5 per week, with nearly half paying less than €2.50 per week. These figures represent a preliminary liability and may be further reduced by additional tax credits or reliefs such as health expenses.
This information was published and is available to view on Revenue’s website:
In terms of the steps being taken to assist persons with an outstanding liability, I note that Revenue has also given assurances that if any income tax and USC liabilities remain following the allocation of unused credits, it will work with taxpayers to collect the outstanding liabilities and a number of flexible arrangements may be entered into, including the collection without interest over an extended period of time for 4 years beginning in 2022. It is also understood that Revenue are facilitating employers who wish to pay the tax liabilities of their employees where income tax and USC liabilities arise from the schemes.
Revenue made a Preliminary End of Year Statement available to all employees from 15 January 2021, including those who were in receipt of the TWSS. The Preliminary End of Year Statement includes information relating to an employee’s income received, including pensions and income from the Department of Social Protection, as well as their tax credit entitlements. For the tax year 2020, the Statement also includes information on the amounts of TWSS payments, if any, received by each employee. In addition, the Statement provides employees with a preliminary calculation of the income tax and USC position for 2020 and indicates whether their tax position is balanced, underpaid or overpaid for the year.
Upon viewing the Preliminary End of Year Statement through myAccount, which is Revenue’s secure online facility for individual taxpayer services, employees have an opportunity to complete their income tax return for 2020, declaring any additional income and claiming any additional tax credits due, for example qualifying health expenses, to arrive at their final liability for 2020.
When a liability is finalised, individuals may opt to fully or partially pay any income tax and USC liability through the Payments/Repayments facility in myAccount. Where individuals do not opt to fully or partially pay, Revenue will collect the liability by reducing their tax credits over 4 years, interest free. The reduction of tax credits will start in January 2022.