Dáil Éireann Debate, Wednesday - 3 March 2021
226. Deputy Catherine Murphy asked the Minister for Finance the way in which jointly assessed persons are treated in respect of tax on the pandemic unemployment payment in instances in which one person remains in full-time employment while the other is in receipt of the payment; if his attention has been drawn to instances in which the person in full-time employment is bearing the liability (details supplied). [12011/21]
View answerThe Pandemic Unemployment Payment (PUP) is a social welfare payment for workers (employees and self-employed) who are out of work 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 were legislated for in Finance Act 2020. They reflect the standard approach to taxation of social welfare type payments. Such payments are liable to income tax but exempt from the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI).
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. The PUP was not taxed in ‘real-time’ in the normal manner in 2020, meaning the collection of any tax due was deferred until year end. This approach was adopted to ensure payments reached recipients as quickly as possible given the suddenness of the pandemic and on the expectation at the time that the emergency supports would be short-term in nature, which turned out not to be the case due to the continued prevalence of COVID-19.
Revenue advise me as follows:
The continuation of the PUP and the Employment Wage Subsidy Scheme (EWSS) into 2021 has re-established the practice of operating PAYE in the normal (real-time) manner for such payments. However, for most people receiving PUP payments in 2021, they will only pay tax when they return to work. Revenue has published information on the taxation of the PUP at: www.revenue.ie/en/life-events-and-personal-circumstances/pup-tax-liability/index.aspx , which may be of interest to the Deputy.
The position for married couples/civil partners may be slightly different to that of other taxpayers. Where a couple is taxed under joint assessment and one spouse or civil partner is in receipt of the PUP but does not have sufficient tax credits to cover the tax due, the tax credits of the working spouse or civil partner are reduced to ensure that the balance of the tax is collected. In jointly assessed situations where one spouse is self-employed and receiving the PUP and the other is a PAYE worker, the standard mechanism for taxing the (PUP) payment is by treating the self-employed spouse as receiving the subsidy for the full year and reducing the combined tax credits accordingly. This standard mechanism is the appropriate one that would apply in the case mentioned in the Deputy's question.
When the ‘self-employed spouse’ returns to work, s/he should immediately cease the PUP claim with DSP. In turn, DSP will notify Revenue that the payment has ceased, and Revenue will then adjust the ‘PAYE spouse’s’ tax credits to reflect the fact that the payment has ceased. A revised instruction (Revenue Payroll Notification) will then issue to the ‘PAYE spouse’s’ employer to reflect the updated position and the revised TCC will issue to them in paper form and via myAccount . Any delay in issuing the revised instruction to the employer will delay receipt of their full tax credit entitlements, so prompt notification by the ‘self-employed spouse’ to the DSP is very important.
In taxing PUP payments in accordance with the legislation, Revenue is seeking to ensure, as far as possible, that people do not end up with a tax liability at the end of 2021 that will have to be paid in future years, particularly where there is already an underpayment in respect of 2020. The alternative ‘year-end’ approach would result in taxpayers having further underpayments in the years ahead in addition to the 2020 liabilities, which could cause financial difficulties down the road. The normal deduction arrangements now applying to the PUP for 2021 insures against this, as tax credits are set aside for offset against any tax due on the PUP, rather than having taxpayers face a higher additional liability at year end.
Finally, the Deputy may be interested to note that there are a range of additional measures in place to assist self-employed taxpayers whose businesses are adversely impacted by COVID-19. These include Debt Warehousing for a range of taxes, offsetting of losses for 2020 against profits for 2019 thereby reducing the income tax payable on those (2019) profits, and offsetting of 2020 losses against other income for the year, including PUP payments. Further information regarding these and other supports is available on the Revenue website at link: www.revenue.ie/en/corporate/communications/covid19/filing-and-paying.aspx .
