Dáil Éireann Debate, Thursday - 25 February 2021
43. Deputy Michael Creed asked the Minister for Finance the reason a person (details supplied) who has recently returned to work and who was previously on the pandemic unemployment payment now appears to be paying an excessive amount of income tax. [10706/21]
View answerThe Pandemic Unemployment Payment (PUP) is a social welfare payment for workers who have become unemployed due to the COVID-19 pandemic. PUP payments are classified in legislation as income supports and are subject to income tax. The taxation arrangements for the PUP are provided for in Finance Act 2020 which reflects the standard approach to taxation of social welfare type payments, which means they are liable to income tax but exempt from the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI).
For 2021, the mechanism to tax the PUP, in common with other Department of Social Protection (DSP) payments, including Jobseekers’ Benefit and Illness Benefit, is by reducing the recipient’s tax credits and rate bands. In the case of jointly assessed couples, both of whom are receiving the PUP, the joint tax credits and rate bands are adjusted appropriately. Where one spouse returns to work, the personal tax credit of the remaining PUP recipient is not assigned to the working spouse in the usual manner. It is instead allocated to any excess PUP amount over and above the PUP recipient’s PAYE tax credit and rate band.
When a PUP recipient returns to work, he or she should immediately inform the Department of Social Protection (DSP) who will cease the PUP claim and notify Revenue that the claim has stopped. Revenue will then adjust the person’s tax credits and rate band as appropriate. Any delay in issuing the revised instruction to the employer will delay the employee receiving his or her full tax credit entitlements, so prompt notification by the employee to the DSP is very important.
Revenue has advised me that both the person in question and his spouse, have had their tax credit and rate band allocations reduced to collect the tax due on their 2021 PUP payments. Revenue has also confirmed that no notification has been received from DSP confirming that the person’s PUP claim has stopped, which is impacting on the amount of tax being deducted from his employment. Revenue has also assured me that, generally, there is no delay between receipt of DSP notifications that PUP payments have stopped, and the adjustment of the individual’s tax credits. Revenue will make direct contact with the person to advise him on how PUP payments are managed for tax purposes and to ensure that DSP has been notified of his return to work.
