Dáil Éireann Debate, Wednesday - 24 February 2021
225. Deputy Bríd Smith asked the Minister for Finance if the situation of self-employed workers who received either the pandemic unemployment payment or wage subsidy schemes in the past year and who may now face tax demands from the Revenue Commissioners will be clarified (details supplied); and if he will make a statement on the matter. [10504/21]
Amharc ar fhreagraThe Temporary Wage Subsidy Scheme provided the payment of income supports to employers in respect of eligible employees, where the employer’s business activities had experienced significant negative disruption due to the COVID-19 pandemic. The scheme was available to all employers, irrespective of how that employer operates (i.e. limited company, sole trade, partnership etc.). However, self-employed individuals may have been eligible for the Department of Social Protection administered COVID-19 Pandemic Unemployment Payment scheme. Revenue advise me that the numbers of self-employed people in receipt of PUP are not readily available.
Payments made under the Pandemic Unemployment Payment (PUP) are income supports and share the characteristics of income. The PUP follows the general taxation rule for social welfare type payments and, thus, is chargeable to income tax, but exempt from the USC and PRSI charges. This will be the case whether, prior to receipt of the PUP, the recipient was a PAYE worker or a self-employed individual.
The taxation arrangements for the PUP were legislated for in Finance Act 2020 and the legislation reflects the standard approach to taxation of social welfare benefits, including jobseekers benefit for the self-employed, which is to tax the benefits on an actual basis under Schedule E. Being taxed on an actual basis means that for each tax year, recipients of the PUP are taxed on the payments that are received in the corresponding calendar year. This is the case regardless of the period for which a self-employed individual carrying on a trade or profession prepares his or her accounts for that trade or profession.
Outstanding liabilities for self-employed tax-payers are not treated in the same manner as outstanding liabilities for PAYE only tax-payers arising from receipt of the wage supports.
Self-assessed individuals, i.e. chargeable persons, who have income from non-PAYE sources are obliged to file a tax return and account for all their income including the PUP in their tax return. This is the case whether or not such individuals were in receipt of the PUP.
The 2020 tax return would be due to be filed by 31st October 2021, and any balance of tax owing would normally be due to be paid at the same time. However, there is provision in Finance Act 2020 which expands the debt warehousing scheme to include taxpayers who self-assess for income tax. The scheme is available to any self-assessed taxpayer (including a proprietary director) who expects that her/his income for 2020 will be more than 25% lower than her/his income for 2019 and as a result s/he is unable to pay the balance of income tax for 2019 and Preliminary Tax 2020. ROS filers had until 10 December to pay and file their 2019 Form 11 and to pay preliminary tax for 2020. This deadline also applied to ROS filers who wished to avail of the debt warehousing scheme.
Where a taxpayer is eligible for warehousing, collection of these liabilities may be suspended for a period of 12 months from 31 October / 10 December, as appropriate. Warehoused liabilities will be subject to no interest for this 12 month period and a reduced interest rate of c. 3% per annum thereafter until paid in full.
If income for 2021 is also more than 25% lower than income for 2019, the balance of 2020 Income Tax and Preliminary Tax for 2021 may be warehoused.
Furthermore, where a self-employed individual incurs a loss for a year of assessment, a provision is available that allows the individual to elect to have that loss offset sideways against other income of the individual, or in cases of joint assessment, against income of the individual’s spouse/civil partner. Therefore, where an individual has incurred a loss in 2020, they may utilise this loss to shelter a tax liability arising from receipt of the PUP.
Finally, tax clearance certificates are available where Returns Filing and Tax Payments are kept up to date and Payment Agreements entered into are adhered to. This includes Warehousing.
