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Covid-19 Pandemic Supports

Dáil Éireann Debate, Wednesday - 30 September 2020

Wednesday, 30 September 2020

Ceisteanna (69)

Seán Sherlock

Ceist:

69. Deputy Sean Sherlock asked the Minister for Finance if additional tax liability or wage deductions will accrue to employees in cases in which their employer is in receipt of the employment wage subsidy scheme and the employee has paid his or her statutory tax in full. [27594/20]

Amharc ar fhreagra

Freagraí scríofa

The specific nature and terms of the Employment Wage Subsidy Scheme (EWSS) are separate and distinct from the Temporary Wage Subsidy Scheme (TWSS) discussed below.  Where an eligible employer makes a payment of wages, within prescribed limits, to a qualifying employee during the scheme, the employer can claim a EWSS subsidy in respect of that employee.

The EWSS will re-establish the normal requirement to operate PAYE and PRSI on all employee salaries, providing for the regular deduction and remittance of income tax, USC and employee PRSI.  This means that some employees may see a reduction in their take home pay.  However, their future tax bill (that would have been accruing under the TWSS) will be reduced in turn and no additional tax liability on the salary payments should accrue to employees.

As regards the TWSS, tax was not collected in real-time through the PAYE system while the scheme was in operation.  Instead, liability to tax will be calculated by Revenue through the regular end of year review process.  It is important to note that there was no additional tax liability accruing to individuals paid via the TWSS than would have been the case had the employees received the same income directly from their employer (unsubsidised by the State).

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.

In the majority of cases the outstanding tax liability is expected to be modest.  In the case of lower income households or those whose income comprises solely of social welfare payments, a liability to tax typically does not arise because the value of social welfare payments received in a tax year are usually lower than the income sheltered by the main income tax credits.  Further, in cases where the tax liability for those payments exceeds unused personal and PAYE tax credits for 2020, the level of income tax and USC due may be reduced if the person has additional tax credits, for example health expenses, to offset.  

Revenue will be adopting a fair and flexible approach to collecting tax due on payments made under the TWSS or the Pandemic Unemployment Payment (PUP).  This will be achieved by reducing their tax credits for subsequent tax years, thereby further minimising any financial hardship to the greatest extent possible.

Revenue has also assured me that if any income tax and USC liabilities still arise following the allocation of unused credits, it will work with its customers 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.

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