Revenue released a PAYE Notice to Employers on 3rd August 2016 containing information on the taxation of Paternity Benefit payable in respect of births or adoptions occurring on or after 1st September 2016.
The total amount of Paternity Benefit is liable to income tax, but is not liable to PRSI or USC. Revenue will receive details of Paternity Benefit payments directly from the DSP. Revenue will tax Paternity Benefit by reducing the employees SRCOP by the amount of the benefit and by reducing the employee's tax credits by 20% of the amount and a revised tax credit certificate (P2C) will be issued to the employer. This P2C will generally issue on the Week 1 Basis.
Employers should not tax Paternity Benefit through their payrolls nor should the amount be included on a P45, P60 or P35L in respect of the employee.
Paternity Benefit is a new payment for employees (primarily fathers) who qualify for paternity leave and who meet the qualifying PRSI conditions. It is also available to self-employed individuals. It applies in respect of children born or adopted on or after 1st September 2016.
An application for Paternity Benefit must be made online through MyWelfare . An individual can only access MyWelfare if he has created a MyGovID account which can be created at www.mygovid.ie. Once registered for MyGovID, the individual will have access to MyWelfare. The individual will also need to have a Public Services Card in order to claim Paternity Benefit.
When calculating an employee's taxable emoluments for the purpose of the SCSB computation, what figure do we use? For example, the employee's gross pay is €75,000 but he sacrifices €1,500 per year for a travel pass under the Revenue approved salary sacrifice arrangement and he contributes €7,500 to the company pension scheme.
Taxable emoluments include anything that is assessable to income tax under Schedule E (i.e. the PAYE system) even where it is otherwise relieved from tax by virtue of another provision in the tax legislation. Hence, even though the employee got tax relief on his travel pass and on his pension contribution (i.e. he only paid tax on €66,000), the gross earnings of €75,000 can be used as the figure for taxable emoluments in the SCSB computation.