I am informed by the Revenue Commissioners that maternity benefit is not subject to income tax, so that the question of a tax rebate in respect of such income should not normally arise. I am further advised that payroll arrangements in operation while an employee is on maternity leave and in receipt of maternity benefit may vary depending on particular circumstances and different contracts of employment. Revenue has given guidance to employers (in Chapter 7 of the Employer's Guide to PAYE) on the different payment/recovery scenarios involved, including where the employer recovers maternity benefit and continues to pay wages, and the appropriate PAYE treatment to be applied in each set of circumstances.
Revenue became aware last year that some employers have been treating maternity benefit incorrectly for taxation purposes. Revenue wrote to the employers concerned (as well as others that may have been in the same situation): (a) reminding them of the correct PAYE treatment; and (b) requesting details of any employees affected for the years 2003 to 2007 (the years for which, at that stage, a rebate claim was still in time in accordance with section 865 of the Taxes Consolidation Act 1997). I am advised that the replies received from these employers are still being examined by Revenue to try to identify the cases of apparent incorrect tax treatment and to determine the best approach to carrying out reviews of the cases concerned. However, it will be necessary for Revenue to seek further details from some of these employers before a full picture of the numbers affected can be established. I am assured by Revenue that this work will be completed in the shortest time possible.
In relation to the four-year time limit on tax rebate claims, the background is that provisions introduced in the Finance Act 2003 (which amended section 865 of the Taxes Consolidation Act 1997) gave taxpayers for the first time a general right to repayment of tax overpaid, subject to a four-year claim limitation period. This became effective for all claims received on or after 1 January 2005. At the same time, the right of the Revenue Commissioners to raise assessments and make enquiries was also reduced to a four-year period, apart from cases where fraud or neglect is suspected. The Finance Act 2003 scheme was devised after careful and detailed consideration. It was designed to achieve the necessary balance between establishing a fair and uniform system for taxpayers, including parity of treatment between PAYE and self-employed taxpayers, while, at the same time, providing the necessary protection for the Exchequer from exposure to claims going back many years.