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Covid-19 Pandemic Supports

Dáil Éireann Debate, Tuesday - 3 November 2020

Tuesday, 3 November 2020

Ceisteanna (423)

Niamh Smyth

Ceist:

423. Deputy Niamh Smyth asked the Minister for Finance if he will address a matter relating to the employment wage subsidy scheme with regard to a person (details supplied); and if he will make a statement on the matter. [32917/20]

Amharc ar fhreagra

Freagraí scríofa

The Temporary Wage Subsidy Scheme (TWSS) commenced on 26 March 2020 as an emergency measure to provide income support to eligible employees where the employer’s business activities were negatively impacted by the COVID-19 pandemic. The scheme operated until 31 August 2020 and was replaced by the Employment Wage Subsidy Scheme (EWSS) from 1 September 2020.

Payments made under the TWSS and the Pandemic Unemployment Payment (PUP), which is administered by the Department of Social Protection, are income supports and as such are taxable in nature. While the TWSS is liable to both income tax and Universal Social Charge (USC), the PUP follows the general taxation rule for social welfare type payments and is exempt from USC and PRSI charges.

The EWSS operates differently to the TWSS in that it is a flat-rate subsidy that is payable to employers based on the number of eligible employees included on their payroll. Eligible employees are defined as those earning weekly gross wages of between €151.50 and €1,462. The EWSS also re- establishes the requirement for employers to operate the ‘normal’ PAYE system each time they pay their employees and deduct income tax, USC and PRSI. These normal (real-time) deductions were not operated for TWSS payments, which will be taxed at year end.

To minimise the end of year tax impact on employees who received TWSS payments, Revenue placed them on the ‘week 1/month 1 basis’ of taxation from 21 June 2020. The ‘week 1/month 1 basis’ preserves employees’ unused tax credits, which can then be offset against any accumulated tax liabilities at year end, including in respect of TWSS and PUP. Any additional credits that an employee may have, for example health expenses, may also be used to further reduce the accumulated tax liability. Any tax liability that still exists once all available credits have been offset can be paid over a four-year period from January 2022 by reducing the employee’s tax credits for those years.

Revenue has advised me that, according to its records, the person in question received a combination of TWSS and PUP payments during the months of March to August 2020. Her employer also received EWSS subsidy payments for September 2020. In accordance with the rules of the TWSS, the payments were paid gross to her without ‘normal’ income tax or USC deductions applying, which instead fall due at year end.

The PUP payments received by the person from the Department of Social Protection during the period in question were also paid gross and the associated income tax liabilities, as with the TWSS, fall due at year end.

The EWSS payments currently being received by the employer are flat-rate subsidies and have no direct bearing on the person’s take-home pay and the employer is obliged to deduct income tax, USC and PRSI from her gross wage in the normal manner. The level of gross wage is a matter between the employer and the person.

The person’s exposure to tax on the subsidy amounts will be reduced by the tax credits that were preserved on her behalf through the ‘week 1’ basis of taxation and may be reduced further if she has any additional credits to claim.

Revenue has also confirmed that it will make direct contact with the person in the coming days to explain how the subsidy schemes operate and to clarify the tax implications for her.

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