The SME Payroll Blog

Welcome to the blog page of SME Payroll Services Ireland.

This page is updated monthly with the most recent and important

payroll changes announced by the Government of Ireland.

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Budget 2025

Universal Social Charge (USC)

From 1 January 2025, the minimum wage will rise to €13.50 per hour. To prevent higher USC rates from affecting this increase, the government is raising the upper limit of the 2% USC band by €1,622, making the new limit €27,382. Additionally, the USC rate on income up to €70,044 will drop from 4% to 3%.

Income Tax Bands
The higher rate of income tax will apply later, with the threshold increasing by €2,000 for all earners starting 1 January 2025. For single individuals, the cut-off will rise to €44,000. This adjustment will provide annual savings of up to €400 for individuals and up to €800 for married couples/civil partners.

Tax Credits
In 2025, personal, employee, and earned income tax credits will increase by €125, bringing them to €2,000 each. Home carer and single person child carer tax credits will each rise by €150. The incapacitated child and blind person’s tax credits will see a €300 increase, while the dependent relative tax credit will go up by €60.

 

 

The 2024 Social Welfare Act introduces a 0.1% rise in PRSI rates across all PRSI Classes starting on 1 October 2024, with the exception of classes or subclasses that carry no PRSI liability:

The threshold for the higher Employer PRSI rate under Class A will increase from €441 per week, €882 per fortnight, and €1,911 per month to €496 per week, €992 per fortnight, and €2,149 per month. This change, effective from 1 October 2024, ensures that employers will only need to pay the reduced rate of 8.9% Employer PRSI for employees working up to 39 hours per week on the national minimum wage.

 

 

This update informs you that the PAYE Assessment Guidelines have been revised to include the new statutory time limit for Revenue to issue or amend PAYE assessments for employers. Effective from 1 January 2024, Revenue has a 4-year time frame to make or adjust PAYE assessments, starting from the end of the year following the year in which the income tax month occurs. For instance, an assessment related to February 2024 can only be made until 31 December 2029, with some exceptions.

 

This update confirms that the Health Expenses Tax and Duty Manual has been revised to:

• Clarify that individuals with PAYE income can now access real-time tax relief for health expenses and nursing home fees.
• Include the updated flat rate amounts for kidney patients and children with life-threatening illnesses.

 

This Revenue announcement that the Rent a Room Relief TDM has been revised to clarify the conditions under which the relief is not applicable between family members and to explain the interaction between the rent tax credit and Rent a Room relief. It also confirms that claiming Rent a Room relief does not affect an individual’s eligibility for mortgage interest relief in 2023.

 

 

This Revenue announcement that the TDM has been revised to incorporate guidance on the mandatory reporting requirements for employers under Enhanced Reporting Requirements (ERR). Specifically, tax-free travel and subsistence payments must now be reported to Revenue via an ERR submission. Additionally, the Civil Service subsistence rates, effective from December 14th 2023, have been updated.

 

 

The Low Pay Commission's report on sub-minimum, or youth rates of the National Minimum Wage has been released by the Minister for Enterprise, Trade and Employment, Peter Burke TD. The Commission has proposed abolishing all sub-minimum rates for employees, effective no earlier than January 1st 2025.

The Commission's recommendations include:

Conducting a study two years after the abolition of youth rates to identify any negative effects, especially for those under 18, and presenting various policy options to the Government. A follow-up study is recommended after four years.

Considering support measures for employers with a significant number of young workers who currently receive sub-minimum wages during and after the phase-out of youth rates, if implemented.

The Department will commission an economic impact assessment and seek legal advice on these recommendations. A Government decision will follow, taking into account the potential effects on SMEs.

 

 

 

The Minister for Social Protection unveiled the Automatic Enrolment Retirement Savings Systems Bill 2024 on April 5th, and it's currently under discussion in the Dáil. This legislation aims to introduce an automatic enrolment retirement savings system, commonly known as Auto-Enrolment, for employed individuals not covered by a qualifying pension scheme. Additionally, it outlines the creation of a new governmental entity named An tÚdarás Náisiúnta um Uathrollú Coigiltis Scoir (National Auto-Enrolment Retirement Savings Authority), tasked with managing the system on behalf of the participants. The implementation of this scheme is slated for January 2025. 

 

 

The Department of Social Protection has released a document answering common queries about Auto Enrolment (AE), expected to launch by late 2024. The FAQ clarifies the eligibility criteria for employee enrollment.

 

Regarding Income Tax Relief for Medical and/or Dental Insurance, affirms the recent update of the Tax and Duty Manual (TDM). This update includes revisions to the list of Authorized Dental Insurers and acknowledges the transfer of tax relief administration from the Collector General Division to the Large Corporates Division.

 

 

This communication confirms the eligibility of directors, including proprietary directors, for the remote working daily allowance. It applies when directors have personally incurred and paid for applicable expenses related to their office or employment, which are taxable under the PAYE system. The expenses must directly relate to the emoluments earned, and all specified criteria must be fulfilled.

 

Additionally, it offers guidance on the obligatory Employer Return of Payments (ERR) reporting, specifically concerning the provision of a remote working daily allowance of up to €3.20.

 

On January 23rd, Revenue kicked off a new initiative to inform PAYE taxpayers about various The Income Tax Return 2023. The campaign aims to make it easier for taxpayers to understand and claim these benefits. Additionally, it serves as a friendly reminder for PAYE taxpayers to report any additional income earned outside the PAYE system. 

 

 

 

The Income Tax Return 2023 - ROS Form 11 is officially live online. Starting in early February 2024, the form will be enhanced to facilitate claims for the mortgage interest tax relief credit. Ongoing updates will also be made to include more prefilled information from third parties, ensuring a smoother and more convenient tax-filing experience.

The Mortgage Interest Tax Credit update reveals that Revenue has released a fresh Tax and Duty Manual. This comprehensive guide outlines the eligibility criteria individuals must fulfill to claim the tax credit.

 

 

Effective January 2024:

• Weekly social welfare payments (maternity, adoptive, paternity, and parent's benefit) will see a €12 increase.
• Parents benefit will extend by 2 weeks on August 1, 2024, totaling 9 weeks.
• Domiciliary Care Allowance will rise by €10 per month.
• Income thresholds for Working Family Payment will increase by €54 per week for all family sizes.
• Child benefit will now cover 19-year-olds in full-time education starting September 3, 2024.
• Employee PRSI for share option gains will be collected through payroll (currently on an RTSO1 form).
• Individuals turning 66 on or after January 1, 2024, can claim State Pension Contributory (SPC) anytime between ages 66 and 70.
  
   

 

The Sick Leave Act 2022 establishes a legal right to sick leave and corresponding pay for employees during certified periods of illness. Effective January 1, 2024, the statutory sick leave duration will be extended from 3 days to 5 days.

 

The Living Wage Technical Group has proposed a 2023/2024 living wage of €14.80 per hour, determined by assessing the minimum essential standard of living in Ireland. It's important to note that employers are not legally required to adhere to this recommended wage.

 

Auto-enrolment presents a fresh retirement savings initiative for employees set to launch in the latter half of 2024. Under this program, employees earning over €20,000 annually, falling within the age range of 23 to 60, and lacking a pension scheme, will be automatically enrolled into the new system. Those earning less than €20,000 or outside the 23-60 age bracket can choose to participate, provided they are not already in a pension scheme. For each €3 contributed by an employee, their employer will match it, and the State will further contribute €1. However, the combined employer and State contributions will be capped for individuals earning up to €80,000 annually across all employments.

 

 

This eBrief serves as confirmation of the recent update to the Rent a Room Relief Tax and Duty Manual. The changes include the addition of information regarding the rent tax credit and the removal of outdated material pertaining to owner occupier relief under specific property-based tax incentive schemes.

Under the updated guidelines, eligible individuals can claim the Rent Tax Credit, provided they are renting a room in the landlord's primary residence or main dwelling. This credit can be claimed as long as the landlord is also availing rent-a-room relief for the income generated from renting out that particular room. Please note that there may be certain exceptions to this rule, which should be reviewed accordingly.

This eBrief confirms the update to Chapter 27 of the Pensions manual, providing additional details on the tax and filing obligations for excess lump sums. Excess lump sums refer to any amount exceeding the €200,000 tax-free lifetime limit.

Lump sums between €200,000 and €500,000 will be subject to a standard tax rate of 20%. This tax must be remitted to Revenue using Form 790AA within three months from the end of the month in which the lump sum is paid to the individual. It's important to note that this portion of the excess lump sum and its associated tax should not be included in the payroll submission.

For lump sums that exceed €500,000, the excess amount will be taxable at the individual's marginal rate through payroll. The pension administrator is responsible for returning this tax to Revenue through a Payroll Submission.

 

 

Revenue has recently issued a communication regarding the revised Rent Tax Credit Manual. This update incorporates additional information aimed at assisting claimants in their rent tax credit claims. The new additions to the manual include:

Guidance for tenants on how to obtain the registration number assigned to their tenancy by the Residential Tenancy Board (RTB), where applicable.

Guidance for landlords who prefer to submit their information directly to Revenue instead of providing it to the tenant.

Detailed information on the real-time claim procedures available in myAccount for PAYE taxpayers who wish to claim the rent tax credit for rent paid in 2023.

Inclusion of screenshots displaying the relevant Form 11 fields for self-assessed taxpayers who are claiming the rent tax credit for rent paid in 2022.

These updates are intended to enhance the clarity and effectiveness of the Rent Tax Credit Manual, enabling claimants to better understand the process and requirements associated with claiming the rent tax credit.

 

 

 

 

Regulations aim to redefine the status of service charges in the calculation of the average hourly pay rate. Specifically, service charges will no longer be considered as a factor when determining the hourly pay rate for employees in certain sectors covered by the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022. The sectors affected by this reclassification include hotels, cafes, restaurants, bookmakers, casinos, hairdressing, and others. This change ensures that employers in these sectors cannot include service charges when calculating an employee's hourly pay rate in accordance with the National Minimum Wage Act 2000.

 

 

In this eBrief, we are pleased to inform you that Section 5 of the Remote Working Relief Tax and Duty Manual has been revised to provide further clarity on the eligibility criteria for tax-exempt payments of up to €3.20 per working day. These conditions are outlined as follows:

• A formal agreement between the employer and the employee must be in place, stating that the employee will work remotely.
• The employee is required to carry out substantial duties related to their employment from their home.
• The employee should spend significant periods of time working from home.

It is important to note that any payments exceeding €3.20 per day will be subject to regular taxation. Additionally, if an employee claims remote working relief, which covers expenses such as electricity, heating, and broadband costs, the amount reimbursed by the employer will be subtracted from the employee's claim.

 

A Form P11D is a document that may be issued by Revenue to an employer, requesting them to provide information about taxable benefits received by employees that fall outside the scope of the PAYE system.

This Revenue update serves as a confirmation that the Tax and Duty Manual for Form P11D has been updated to reflect the recent change regarding employer contributions to a PRSA. As of 1st January 2023, these contributions are no longer considered a taxable benefit and are no longer required to be included in the Form P11D. However, both employer and employee contributions to a PRSA still need to be reported in a payroll submission. Before 2023, any employer contribution to PRSI had to be reported on a Form P11D.

This Revenue update serves as a confirmation that the Tax and Duty Manual has been revised to incorporate the alteration pertaining to the designated sum. Starting in 2023, if the income of the dependent relative surpasses the specified threshold of €16,780 (formerly €16,156), the dependent relative tax credit will be reduced to zero.

 

Rent Tax Credit confirms that a new Rent Tax Credit TDM has been created which outlines the conditions which must be met in order for an individual to be eligible to claim the new rent tax credit, and the procedure for claiming it.

 

 

Since 1 January 2023, employees who have at least 13 weeks continuous service with that employer from whom the leave is to be taken, have an entitlement to statutory sick leave (SSL) in respect of any day on which he or she is scheduled to work but is incapable of doing so due to illness or injury. For 2023, an employee is entitled to 3 days SSL and statutory sick pay (SSP) where he provides his employer with a medical certificate.

The daily rate of SSP is calculated at 70% of the employee’s daily rate of pay, subject to a maximum of €110.

 

 

A new permanent public holiday will commence in 2023. This will be the first Monday in February.

 

 

Leo Varadkar has announced the introduction of a National Living Wage (NLW) for employees which will be phased in over a 4-year period from this year.

The National Minimum Wage will be gradually increased in 2023, 2024 and 2025.

From 1 January 2023, the NMW will be increased by 80 cent to €11.30 per hour. More information can be found below:

 

The Minister for Social Protection, Heather Humphreys, published the Social Welfare Bill. The Bill will give effect to the range of measures announced in Budget 2023. The increases in social welfare rates will apply from the first payment date in 2023, for example:

• Illness Benefit, Maternity Benefit, Adoptive Benefit, Paternity Benefit and Parent’s Benefit will increase on 2 January 2023, and

• The State Pension Contributory will increase on 6 January 2023.

 

The Small Benefit Exemption has increased from €500 to €1,000.

Please see below link for more details. 

Revenue's artilce can be found here

 

With effect from 1 January 2023, employees with 13 weeks continuous service will be entitled to statutory sick pay (SSP) for up to 3 days certified sick leave in 2023. SSP will be calculated:

If the employee’s pay is calculated by reference to

1.         a fixed wage, salary, allowance or bonus for each week, month or any other fixed period, or

2.         a fixed hourly or other time rate for a set number of hours (or other period of time) per week, month or any other fixed period,

the gross amount of SSP payable in respect of any statutory sick leave day is the lesser of €110 or 70% of the sum (including any regular bonus or allowance the amount of which does not vary in relation to the work done by the employee but excluding any pay for overtime or commission) paid to the employee in respect of the normal daily hours last worked by him or her before the statutory sick leave day. More information can be found here.

 

The Payment of Wages (Amendment) (Tips and Gratuities) Act 2022 was signed by the President on 20^th July 2022, but is subject to a Commencement Order. The categories of employers and employees covered by the Act will be specified in Regulations. 

Parent’s Leave and Benefit

Since 1st July 2022, Parent’s Leave and Benefit increased from 5 weeks to 7 weeks, which is available to parents within 2 years of their child’s birth or adoption. Entitlement to Parent’s Benefit is subject to the individual having the required number of PRSI contributions.

 

The Tax and Duty Manual has been updated to confirm the specified amount for 2022 is €16,156. Where the dependent relative’s income exceeds the specified amount, the tax credit is reduced to nil. 

As announced in Budget 2022, the Treatment Benefit Scheme will be extended from 28 May 2022 to include the full cost of one hair replacement item (wig, hairpiece, etc.) per calendar year up to a maximum of €500. The scheme covers hair loss resulting from a disease or treatment of a disease such as cancer or some forms of alopecia.

The Minister for Social Protection, Heather Humphreys TD, has announced the details of the Final Design principles for the Automatic Enrolment Retirement Savings System for Ireland. Ireland is the only OECD country that doesn’t yet operate an Auto Enrolment or similar system as a means of promoting pension savings. Under Auto Enrolment employees will have access to a workplace pension savings scheme which is co-funded by their employer and the State.

The eBrief outlines that Remote Working Relief Tax and Duty Manual has been updated. this outlines the changes introduced by Finance Act 2021. For 2022 and subsequent tax years the amount of relevant expenditure qualifying for tax relief is 30% of the annual electricity, heat and broadband costs apportioned based on the number of days spent working from home during the year.

As outlined here, a new public holiday will be introduced to mark St Brigid’s day from 2023. This will bring the total public holiday entitlement in Ireland to 10. The new public holiday will be on the first Monday of February, except where the 1st of February falls on a Friday in which case it will fall on the Friday. The new public holiday will bring Ireland more into line with the European average.

A once-off public holiday will occur on Friday 18th March 2022 as a day of remembrance and recognition in memory of more than 9,000 people who lost their lives in Ireland as a result of Covid-19. This means that many employees will have a four-day weekend as St Patrick’s Day falls on Thursday 17th March 2022.

This Revenue eBrief confirms that Revenue have created a new Tax and Duty Manual on Revenue documentation to verify personal addresses for non-Revenue purposes. It outlines some of the documentation which could be used to verify an address such as a Tax Credit Certificate, Employment Detail Summary, Statement of liability, etc. and states that third parties should accept them as provided as Revenue will not be certifying or stamping them.

Finance Minister Pascal Donohoe and Public Expenditure Minister Michael McGrath outlined the details in the Dáil of budget 2022 announcement. Summary of the changes include:

• 2nd ceiling the Universal Social Charge rate band increases from €20,687 to €21,295
• Minimum wage rises 30 cent to €10.50 per hour
• Standard rate bands increased by €1,500
• Personal tax, employee tax and earned income credits by €50
• Income tax deduction amounting to 30% of vouched expenses for heat, electricity and broadband incurred while working from home.
• €5 increase in main weekly welfare payments and State pension confirmed, including young jobseeker's allowance
• Maternity benefit and parental leave payments to be increased by €5 per week
• Parent's Benefit extended by 2 weeks to 7 weeks from July next year
• Employment Wage Subsidy Scheme will remain in place, in a graduated format, until 30 April, 2022 - the scheme will close to new employers from 1 January, 2022.

 

The DSP has seen a near five-fold increase in the number of parent’s availing of Parent’s Benefit during the period April to July 2021 (20,400) in comparison to the same period in 2020 (4,600). Parent’s Leave and Benefit was extended from 2 weeks to 5 weeks in April 2021 and can be availed of during the first 2 years following the birth of a child or following the date of placement of an adopted child. Any parent who originally availed of the 2 weeks can now apply for the additional 3 weeks assuming their child was born or adopted since 1st November 2019.

This eBrief confirms that the Health Expenses Tax and Duty Manual has been updated to include examples on qualifying nursing home expenditure to illustrate how tax relief for Nursing Home Care is given. As outlined above, tax relief is now available on a real time basis in respect of health expenses and nursing home care.

The Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar TD, announced details of the new statutory sick pay scheme which will provide all employees with the right to paid sick leave. While the Bill is not yet available, the Minister has indicated that Statutory Sick Pay (SSP) will be phased in over 4 years, with employees being entitled to:

•         A maximum of 3 days SSP in 2022,

•         A maximum of 5 days SSP in 2023,

•         A maximum of 7 days SSP in 2024, and

•         A maximum of 10 days SSP in 2025.

SSP will be payable at 70% of an employee’s pay subject to a maximum daily rate of €110 (which may be changed by ministerial order in line with inflation). Employees will have to provide a medical certificate to avail of SSP and they must have been employed by their employer for a minimum of 6 months. 

The Workplace Relations Commission published a Code of Practice to give guidance on best practice to employers and employees on the right to disconnect.The Code applies to all types of employment, whether the employee is working remotely, in a fixed location, at home or is mobile. While the Code is not legally binding on employers, it is admissible as evidence before a Court, Labour Court or the WRC.

• The Right to Disconnect has 3 main elements as follows:
• The right of an employee to not routinely perform work outside normal working hours
• The right not to be penalised for refusing to attend to work matters outside of normal working hours, and
• The duty to respect another person’s right to disconnect (e.g. by not routinely emailing or calling outside normal working hours).

The Code highlights various obligations for both employers (e.g. providing employees with details of their working hours, ensuring employees take rest breaks, providing a safe place of work, not penalising employees for acting in compliance with any legislation) and employees (e.g. managing their working time, cooperate with any system used by the employer to record working hours, be mindful of colleagues and customer’s right to disconnect, notifying their employer where they were unable to avail of a rest break and the reason for same, etc.).

The Family Leave and Miscellaneous Provisions Act 2021 was signed by the President on 27th March. The Act provides for the extension of Parent’s leave from 2 weeks to 5 weeks and an extension in the period in which Parent’s leave can be taken from 1 year to 2 years following the birth of the child/date of adoption.

The leave is available to both parents of the child and can be taken in a continuous block or in separate periods of at least 1 week in duration. Where a parent has previously availed of 2 weeks Parent’s leave, they can now avail of the balance assuming the child is under 2 years of age/within the first 2 years of adoption.

Parent’s Benefit payable by the DSP will also increase from 2 weeks to 5 weeks.

The DSP has published an updated guide to PRSI for the Self Employed which outlines who is liable to pay PRSI Class S contributions, Please find here that guide.

From 1st March 2020, the waiting days for Illness Benefit and Injury Benifit reduce from 6 days to 3 days (i.e. the DSP will not pay any benefit in respect of the first 3 days of a claim).

Revenue published a list of employers who received payments under EWSS in 2020

Revenue published a list of employers who received a EWSS subsidy payment in 2020. Over €1.4 billion was paid to over 39,800 employers in respect of 443,100 employees.

Revenue published a list of employers who received payments under EWSS in 2020

Revenue published a list of employers who received a EWSS subsidy payment in 2020. Over €1.4 billion was paid to over 39,800 employers in respect of 443,100 employees.

The weekly threshold for the higher rate of employer PRSI under Class A increased from €395 to €398 on 1st January 2021. This coincided with the increase in the national minimum wage and ensures that an employer pays the reduced rate of employer PRSI of 8.8% in respect of an employee working a 39 hour week who is paid the national minimum wage.

The list offlat rate expense allowancesfor 2021 is available on the Revenue website. Revenue concluded a comprehensive review of the flat rate expense allowances in 2019. The implementation of any planned changes to the flat rate expense regime has been deferred until 1st January 2022.

The USC Rate 2 Threshold increased from €20,484 (€393.93 per week) to €20,687 (€397.83 per week) for 2021. This ensures that those on the national minimum wage only incur USC at a maximum rate of 2% in respect of a 39 hour week.

With effect from 1 January 2021, applying by email is no longer possible, and it has been replaced by an online PPS Number application service via MyWelfare.ie.

In order to apply for a PPS Number via the online service, individuals will need to have a basic MyGovID account. This can be set up at www.mygovid.ie.  Applicants will need to provide evidence of why they require a PPS Number, and they will need to upload photos or scanned copies of the following:

• an identity document
• a proof of address, and
• evidence of why the individual need a PPS Number.

If an individual is applying for a PPS Number to take up employment, they must have a signed offer of employment from their employer confirming when their position is to start or when it started. The employer’s letter should be on company headed paper and with the employer’s contact details together with the employer/company registered number.       

Further information regarding the PPSN application process can be found here

From the 1st of January 2020. The minimum wage has increased from €10.10 to €10.20 per hour.. More can be found here.

The Minister for Enterprise, Trade and Employment launched a public consultation on 16th November 2020 seeking views in relation to a new statutory sick pay scheme which the Minister hopes to introduce by the end of 2021. This would introduce a legal requirement on employers to pay sick pay to an employee who is unable to work because of illness. Currently there is no legal obligation on an employer to pay sick pay to employees. The introduction of a statutory sick pay scheme will bring Ireland into line with the majority of other EU countries.

The scheme will be designed to protect employees but must be fair and affordable for employers. The public consultationwill run until 18th December 2020.

As announced in Budget 2021, the DSP has confirmed that Parent's Benefit and Leave will increase from 2 weeks to 5 weeks from April 2021 and the period it can be taken will be extended up to the child's second birthday or within 2 years following adoption.

The Department of Employment Affairs and Social Protection (DEASP) has changed its name to the Department of Social Protection (DSP) since 21st October 2020.

This eBrief confirms that the PAYE Services - Review your Tax Tax and Duty Manual has been updated to reflect changes to the PAYE system including:

The Statement of Liability replacing the P21 Balancing Statement

•  The availability of a Preliminary End-of-Year Statement from 2019 onwards
• The facility to claim an Unemployment Repayment for 2020
• The facility to Create a Summary of your Pay and Tax Details,
• Updated guidance on how to complete your Income Tax Return, claim additional tax credits and reliefs, and obtain an Employment Detail Summary.

Finance Minister Pascal Donohoe and Public Expenditure Minister Michael McGrath outlined the details in the Dáil this on 12th of October.

The Government has unveiled a €17.75 billion budget package in the Dail.

The Employment Wage Subsidy Scheme EWSS will now remain in place to the end of 2021.

e-Workers

An employer is permitted to make tax free payment of up to €3.20 per working day to e-workers to cover additional utility costs incurred by employees working from home. Where an employer does not pay €3.20 to an e-worker, the employee is entitled to make a claim for tax relief in respect of the light and heat expenses. For 2020, broadband costs will also be allowable in respect of employees working from home. In addition, tax relief can be claimed in respect of any expenses incurred wholly, necessarily and exclusively in the performance of duties.

National Minimum Wage

The National Minimum Wage will increase by 10 cent from €10.10 to €10.20 gross per working hour in respect of hours worked on or after 1st January 2021.

Dependent Relative Tax Credit

The Dependent Relative Tax Credit will be increased by €175 from €70 to €245.

Sea-going Naval Personnel Tax Credit

The Sea-going Naval Personnel Tax Credit will be increased by €230 from €1,270 to €1,500.

Universal Social Charge (USC)

There was no change to the USC exemption threshold of €13,000.

The threshold for the 2% rate will be increased by €203 from €20,484 to €20,687 in line with the increase in the national minimum wage. As a result, the amount of income liable to USC at 4.5% reduces from €49,560 to €49,357. There has been no change to the rates of USC.

For 2021, USCwill apply at the following rates for those earning in excess of €13,000:

Rate Bands       Rate

Up to €12,012    0.5%

Next €8,675       2%

Next €49,357     4.5%

Balance            8%

Medical card holders and individuals aged 70 years and over whose aggregate income does not exceed €60,000 will continue to pay a maximum USC rate of 2% in 2021.

PRSI The weekly threshold for the higher rate of employer PRSI under Class A will increase from €395 to €398 in line with the increase in the national minimum wage. This will ensure that an employer will pay the reduced rate of employer PRSI of 8.8% in respect of an employee working a 39 hour week who is paid the national minimum wage.

Amendments to the Cycle to Work Scheme have been introduced for 2020.

The scheme currently allows for a bicycle and associated safety equipment to the value of a €1,000 to be acquired by an employee every 5 years. This limit will increase from €1,000 to €1,250 in respect of bicycles and to €1,500 in respect of an electric bike. Employees will be able to acquire a new bike once every 4 years (currently every 5 years).

The proposal to extend Parent's Leave to 5 weeks will be examined by as part of the budget process in the upcoming Budget 2021.

This link confirms that the relevant Tax and Duty Manual has been updated to reflect the tax deductibility of expenses that arise in the performance of the duties of employment. The manual provides guidance on the various elements of the "wholly, exclusively and necessarily incurred in the performance of the duties" test which must be met for expenses to be deductible for tax purposes. The manual also gives examples such as laundry, clothing, uniforms, professional membership fees, purchase of a computer, trade union membership, etc.

This link provides confirmation that the relevant Tax and Duty Manual has been updated to reflect the increase in the Home Carer Tax Credit for 2020.

 

The Minister for Employment Affairs and Social Protection has announced that she received Government approval to revise the draft Scheme of the Payment of Wages (Amendment) Bill 2019 to include a legal right for workers to receive "on a fair, transparent and equitable basis" tips and gratuities  paid by electronic means such as by debit and credit cards. Approval has also been given to progress this Bill as quickly as possible.

Through her Bill, the Minister intends:

• To amend the Payment of Wages Act to ensure that tips and gratuities cannot be used to 'make-up' or satisfy a person's contractual wages;

• To provide for a requirement on employers to clearly display, for the benefit of workers and customers, their policy on how tips, gratuities and service charges are distributed;
• To provide a legal entitlement for workers to receive tips and gratuities that are paid by customers in electronic form (i.e. debit or credit cards)

To oblige employers to distribute electronically gifted tips to workers in a "fair, transparent and equitable manner"

PAYE taxpayers are reminded that there is a 4 year time limit for claiming tax refunds, hence the deadline for 2015 claims is 31st December 2019.

At the beginning of November, Revenue wrote to approximately 130,000 PAYE taxpayers who have paid tax but have not claimed any additional tax credits or reliefs in the previous 5 years. Some of the most common reasons for tax refund claims include health expenses, nursing home fees, tuition fees, flat rate expenses, non-routine dental treatment, change in personal circumstances, etc

This eBrief confirms that the relevant Tax and Duty Manual has been updated to include the reimbursement of toll charges, reimbursement of expenses to e-workers, reimbursement of travel and subsistence expenses by intermediaries and temporary assignees from the State working abroad on foreign assignments.

Question: An employer purchased a set of tools for an employee to the value of €600. It was agreed that the employee would reimburse the employer at a rate of €50 per week over a period of 12 months. Should this be treated as a preferential loan for BIK purposes?

Answer: Yes, this is a preferential loan as the employer has advanced a form of credit to the employee which will be repaid over a 12 month period. As no interest has been charged by the employer, the BIK should be calculated based on the Revenue specified rate of 13.5%. The BIK can be calculated on a reducing balance basis as each repayment is made.

Where the cost of the tools was wholly, exclusively and necessarily incurred in the performance of his duties of employment, the employee could consider submitting a claim for tax relief from Revenue.

Parent's Leave and Benefit Bill has been published by the Minister for Justice and Equality, Minister for Employment Affairs and Social Protection and the Minister of State with responsibility for Equality, Immigration and Integration.

The Bill provides for 2 weeks parent's leave and benefit for each parent of a child born or adopted on or after 1st November 2019, during the first year of the child's life. Benefit will be paid from the DEASP at the same rate as Maternity and Paternity Benefit. This leave and benefit is in addition to an employee's entitlement to maternity, paternity, adoptive or parental leave. It is expected that the Bill will be passed through the Dáil and enacted before 1st November 2019.

This eBrief confirms that the relevant Tax and Duty Manual has been updated to clarify the PRSI Class which applies to operators engaged by Farm Relief Services (FRS). Operators who provide labour only are regarded as employees and are taxable under the PAYE system. Based on a decision by the Department of Employment Affairs and Social Protection, PRSI Class S initially applies to the income of these operators. However, PRSI Class A applies where the operator continues to be engaged by FRS on the same farm for more than 12 months.

This eBrief confirms that, with effect from 1st September 2019, payments made to part-time lecturers, teachers and trainers, including those who give a "once off" lecture (i.e. once or twice a year to the same body), are taxable under the PAYE system as Revenue consider that such individuals are generally engaged as employees.

Prior to 1st of Sept 2019, where an individual gives a "once off" lecture, there is no requirement to tax such payments under the PAYE system. The individuals are responsible for returning such fees under the self-assessment system. Where the individual gave a series of "once off" or guest lectures for the same body, such payments were taxable under the PAYE system.

 

This eBrief confirms that, with effect from 1st September 2019, payments made to part-time lecturers, teachers and trainers, including those who give a "once off" lecture (i.e. once or twice a year to the same body), are taxable under the PAYE system as Revenue consider that such individuals are generally engaged as employees. 

Prior to 1st September 2019, where an individual gives a "once off" lecture, there is no requirement to tax such payments under the PAYE system. The individuals are responsible for returning such fees under the self-assessment system. Where the individual gave a series of "once off" or guest lectures for the same body, such payments were taxable under the PAYE system.

The Workplace Relations Commission published a Code of Practice to give guidance on best practice to employers and employees on the right to disconnect.The Code applies to all types of employment, whether the employee is working remotely, in a fixed location, at home or is mobile. While the Code is not legally binding on employers, it is admissible as evidence before a Court, Labour Court or the WRC.

The Right to Disconnect has 3 main elements as follows:

The right of an employee to not routinely perform work outside normal working hours

The right not to be penalised for refusing to attend to work matters outside of normal working hours, and

The duty to respect another person’s right to disconnect (e.g. by not routinely emailing or calling outside normal working hours).

The Code highlights various obligations for both employers (e.g. providing employees with details of their working hours, ensuring employees take rest breaks, providing a safe place of work, not penalising employees for acting in compliance with any legislation) and employees (e.g. managing their working time, cooperate with any system used by the employer to record working hours, be mindful of colleagues and customer’s right to disconnect, notifying their employer where they were unable to avail of a rest break and the reason for same, etc.).

 

Question:

An employee was granted 18 weeks parental leave by her employer in relation to her 6 year old child in 2016. She has enquired if she is entitled to any additional parental leave in relation to this child from September 2019.

Answer:

Currently, an employee is entitled to 18 weeks unpaid parental leave in respect of each qualifying child (i.e. a child who is under 8 years of age). From 1st September 2019 parental leave will increase by 4 weeks to 22 weeks and the age threshold for the child will increase from 8 to 12 years. An employee can avail of any outstanding balance of parental leave up to an overall maximum of 22 weeks from 1st September 2019 assuming the child is under 12 years. Where a child has a disability or long term illness, an upper age limit of 16 applies.

The Minister for Employment Affairs and Social Protection has launched an Information Campaign in relation to the Working Family Payment to alert employees that they may qualify for this scheme while they are working. The scheme supports employees with families who have low earnings. Currently over 53,000 working families with 120,000 children are receiving an average weekly payment of €135.

The Minister for Employment Affairs and Social Protection, Regina Doherty TD is planning to introduce an amendment to the Payment of Wages Act 1991 in relation to tips and gratuities in the workplace to ensure that tips and gratuities cannot be used to make up or satisfy contractual rates of pay. Employers will also be required to clearly display their policy on how tips, gratuities and service charges are distributed in their workplace.

The Government is opposing a Private Members Bill entitled the 'National Minimum Wage (Protection of Employee Tips) Bill' which was initiated in the Seanad as its provisions would lead to unintended negative side effects for employees and employers, for example it could threaten the income employees receive from tips by making the tips taxable through payroll, as well as increasing the level of bureaucracy for employers.

Question: 

An employer operates the cycle to work scheme via the salary sacrifice arrangement and recovers the cost of the bicycle and safety equipment up to a maximum of €1,000 over a 12 month period. Where the cost of the bicycle and safety equipment exceeds €1,000, how should the employer deal with the excess amount?

 

 Deleted

Since 1st October 2017, the duration of maternity leave and benefit has been extended in cases where a baby is born prematurely. The extended period of maternity leave and benefit will be the equivalent to the duration between the actual premature birth  of the child and the date the maternity leave was expected to commence (usually 2 weeks before the expected date of birth). This extended period of maternity leave will commence following the 26 weeks of maternity leave.

For example, if a baby is born in the 30th week of pregnancy, the mother would have an additional entitlement to approximately 7 weeks of maternity leave and benefit (i.e. from the date of birth in the 30th week to the scheduled maternity leave commencement date.

 

Question:

We pay private sector pensions to retired employees. One of our pensioners is moving to Spain. Should we apply to Revenue for a PAYE Exclusion Order for him?

Answer: 

Generally Irish pensions are chargeable to tax in Ireland regardless of the residence of the individual. However, where the individual is resident in a country with which Ireland has a double taxation agreement (DTA) for the relevant tax year and is not tax resident in Ireland, Revenue will generally issue a PAYE Exclusion Order as most DTAs provide that private pensions are taxable in the country where the individual is resident.

It should be noted that:

• Split year residence relief does not apply to pension income

• The pension would be taxable in Ireland if the individual is resident in a non-DTA country

  The above treatment does not apply to Government or Local Authority pensions which are taxable in Ireland regardless of where the recipient is tax resident.

Question:

We had a temporary employee working for us for 10 weeks. His normal working week was 37.5 hours. During this 10 week period he was out sick for 3 weeks. However, we only received a medical certificate for 1 of these weeks. How should we calculate his holiday entitlement for this 10 week period?

Answer: 

As the employee has not worked 1,365 hours in the leave year, his holiday pay should be calculated based on the greater of:

(a) 8% of his hours worked subject to a maximum of

 4 working weeks, or

(b) 1/3rd of a working week for each month in which the employee works at least 117 hours.

Any absence on certified sick leave is considered to be time worked for the purpose of accruing annual leave. In contrast, any absence on uncertified sick leave is not considered to be time worked for the purpose of accruing annual leave.

Using option (a), the employee's holiday entitlement would be calculated as 24 hours (37.5 hours x 8 weeks x 8%).

With regard to option (b), there is insufficient information to determine if the employee has worked at least 117 hours in any particular month. Assuming the employee met this qualifying condition for 2 months (10 weeks less 2 weeks of uncertified sick leave) his holiday entitlement would be calculated as 25 hours (1/3rd of 37.5 hours x 2 months).

Minister Doherty has launched an awareness campaign to encourage new or expectant fathers who intend taking paternity leave to apply for Paternity Benefit .

Paternity Benefit of €235 per week for 2 weeks can be claimed by employed and self-employed fathers, who meet the qualifying PRSI conditions, within the first 6 months of their child being born. Figures for the 11 month period to the end of July 2017 show that 20,375 people have availed of Paternity Benefit.

Applications can be made online via MyWelfare , however this requires a MyGovID account and a Public Services Card. Any person experiencing difficulty making an online claim can contact the DSP to request a paper form. Further information is available here.

Question:

We provide vouchers to our employees at Christmas. The vouchers are under €500 and are given tax free under the small benefit exemption. One of our part-time employees has informed us that he has another employment and has already received a tax free voucher from his other employer. Can an employee receive 2 vouchers tax free under the small benefit exemption from 2 different employers in the same tax year?

Answer: 

Yes, if an employee has 2 different employers they may receive the small benefit exemption from each employer. An employer has no way of knowing, and is not expected to know, how any other employer chooses to reward his staff.

The legislation provides that an employer may provide an employee with a voucher (or benefit in the form of a tangible asset) free of tax where the following conditions are satisfied:

• It does not form part of a salary sacrifice arrangement

• It does not exceed €500 in value,

• The voucher can only be used for the purchase of goods and services and cannot redeemed for cash, and

• Only one benefit or voucher is given by an employer to an employee in a tax year.

Question:

My employer paid for a GNIB (Garda National Immigration Bureau) card for an employee who moved to Ireland to take up employment. Does this constitute a taxable BIK for the employee?

Answer: 

Yes, any payment towards/for a GNIB card by an employer is a taxable BIK for the employee concerned.

While a taxable BIK does not arise on the cost of an entry visa or work permit which may be paid by the employer, the GNIB card is different to an entry visa/work permit. The GNIB card is a separate identity card which is not job related, therefore it is subject to tax.  

Revenue Update

Revenue launched their new website on 7th June 2017. The new website is presented in a user friendly manner ensuring information is easy to read, understand and find.

Key features include:

A layout that can be easily viewed on any device.

There are various options to choose from on the home page such as Jobs and Pensions, Personal tax credits, reliefs and exemptions, Life events and personal circumstances, Employing people, etc. where the appropriate information can be found.

Extensive use of examples to ensure information is easy to understand.

A new feedback facility to enable users share their views and suggestions with Revenue in order to help improve the quality of information available. 

Since 17th June 2017, PAYE Anytime has been retired and replaced with an enhanced PAYE Services option which allows PAYE taxpayers to "Manage your tax 2017", "Review your tax 2013 - 2016" (for example where a taxpayer wishes to claim tax relief on health expenses), "Request an End of Year Statement (P21)" (where the employee can obtain a statement without completing a review), and "Add a Job or Pension". 

A comprehensive range of options is available to Tax Professionals (e.g. eBriefs, Tax and Duty Manuals, Legislation, etc.). 

The "Contact us" facility has been updated to enable taxpayers obtain contact details for their tax office based on their PPSN or location.

Income tax leaflets (e.g. IT51 and IT54 which dealt with travel and subsistence expenses) have been retired with the material appearing under the relevant topic  on the website.

Where the material is more complex it is incorporated into the relevant Tax & Duty Manual. For example, Tax & Duty Manuals 05.02.04  (subsistence) and 05.02.05 (motoring/travel) have been updated with the content from IT54 and IT51.

Maternity Benefit Update

The DSP has been experiencing delays in the processing of Maternity Benefit payments for its customers due to staffing and operational issues since February 2017.

The DSP are working to clear the backlog as quickly as possible. Once a claim has been approved all arrears will be processed with the first payment from the beginning of the maternity leave.

Question:

One of our employees completed a qualification relevant to his job. The course fee was paid by the employer. The employer would like to give the employee an award for passing his exam. Is this payment taxable?

Answer: 

The payment of an award to an employee on passing an exam will not give rise to a tax liability provided the award can reasonably be regarded as a reimbursement of expenses likely to have been incurred by the employee in studying for the qualification or sitting the examination (e.g. travel costs, exam fees, manuals or other reading material, stationery, etc.), and the qualification is relevant to his employment. The award is fully taxable where these criteria are not satisfied.

Question:

An employee ceased his employment on the day before a public holiday. Is he entitled to a public holiday benefit in respect of that public holiday?

Answer: 

Where an employee ceases to be employed at any time during the week ending on the day before a public holiday (i.e. in the 7 day period immediately preceding the public holiday), and the employee has worked for his employer during the previous 4 weeks, the employee is entitled to be compensated for the public holiday at the appropriate daily rate.

A part-time employee must also have satisfied the condition of having worked 40 hours in the preceding 5 week period ending on the day before the public holiday.

 

Question: 

An employee was mistakenly reimbursed for expenses to the amount of €2,400. The employer and employee have come to an agreement where the employee will repay the amount back to his employer at a rate of €100 per month over a period of 2 years.

Would this be considered to be a preferential loan and subject to Benefit in Kind (BIK)?

Answer: 

Yes, it would appear that this should be considered to be a preferential loan as money has been advanced to the employee free of tax and it will be repaid over a 2 year period. As no interest is being charged by the employer, the BIK should be calculated based on the Revenue specified rate of 13.5%, on a reducing balance basis.

Are Good Friday and Easter Monday Public Holidays?

Good Friday is not one of the 9 statutory public holidays, but it is a bank holiday. If an employee does not work on this day, it is generally treated as annual leave unless they have a contractual entitlement to be paid for it.

Easter Monday is a public holiday and employees are entitled to a paid day off on the day, a paid day off within a month, an additional day's pay or an additional day of annual leave. Part-time employees must have worked 40 hours in the preceding 5 week period in order to have an entitlement. For those employees who normally do not work on a Monday, their public holiday entitlement is calculated as one-fifth of their normal working week.

As both Good Friday and Easter Monday are SEPA holidays, for those employees who otherwise would normally be due to be paid on Friday 14th April, employers are reminded that they may need to change the electronic funds transfer processing date so employees' bank accounts are credited on Thursday 13th April.

Question: 

An employee who requested a reduction in her working hours 18 months ago is now being made redundant and has asked if her statutory redundancy will be based on her current working hours at the date of redundancy or her original hours (prior to the reduction)?

Answer: 

Statutory redundancy is based on an employee's working hours at the date of redundancy, unless the employee was on short-time, in which case statutory redundancy may be based on the working hours prior to the short-time. In this instance, as it was the employee who requested the reduction in her working hours, her statutory redundancy is based on her working hours at the date of redundancy.

St. Patrick's Day falls on a Friday this year. An employee is entitled to their employer's choice of the following, in respect of a public holiday:

a)         A paid day off on that day

b)         A paid day off within a month of that day

c)         An additional day of annual leave

d)         An additional day's pay.

If an employer does not nominate one option 21 days before the holiday, the employee automatically receives a paid day off on the public holiday.

Full time employees are immediately entitled to a public holiday benefit. Part-time/casual employees must have worked at least 40 hours in the period of 5 weeks ending on the day before the public holiday to qualify for the public holiday benefit.

Where a public holiday falls on a day on which the employee normally works, or is normally scheduled to work, then:

• A full time employee is entitled to one of the public holiday benefits listed above.

• A part-time employee must have satisfied the above condition of having worked 40 hours in the previous 5 weeks to be entitled to one of the public holiday benefits listed above.  

  Where a public holiday falls on a day on which an employee is normally off work, or is not scheduled to work, then: 

• A full time employee is entitled to a public holiday benefit equal to 1/5th of his normal weekly pay in respect of the normal weekly hours last worked by the employee before that public holiday,

• A part-time employee is also entitled to a public holiday benefit equal to 1/5th of his normal weekly pay, based on the average weekly pay (including any regular bonus or allowance, but excluding overtime) in the 13 weeks worked immediately prior to the public holiday, assuming they have worked 40 hours or more in the previous 5 weeks.  

  Where an employee ceases to be employed at any time during the week ending on the day before a public holiday (i.e. in the 7 day period immediately preceding the public holiday), and the employee has worked for his or her employer during the previous 4 weeks, the employee is entitled to be paid a public holiday entitlement for the public holiday, calculated at the appropriate daily rate. A part-time employee must also have satisfied the condition of having worked 40 hours in the preceding 5 week period ending on the day before the public holiday.

 

Question:

An employee was provided with a benefit in kind in 2016 but this this was not relayed to the payroll department in 2016. Can I process this in the 2017 payroll to collect the liabilities which are due?

Answer: 

No. As the benefit was provided in tax year 2016, it should be recorded in 2016.

The value of the BIK and the appropriate PAYE, PRSI and USC liabilities should be calculated. If the employer's P35 for 2016 has not been filed yet, the employer should correct his records to ensure that the P35 is accurate when it is filed (on or before 23rd February 2017, where it is paid and filed on ROS). If the employer has already filed his P35 for 2016, the employer can submit an amended P35 to record the amended figures.

The liabilities arising on the BIK should be paid over to Revenue and this amount should be recovered from the employee before 31st March 2017. Any amount not recovered from the employee by 31st March 2017 is a further BIK which is liable to PAYE, PRSI and USC.

Finance Bill 2016 as passed by Dáil Éireann, provides that, with effect from 1st January 2017, travel and subsistence expenses incurred by an Irish resident non-executive director in attending board meetings in Ireland can be reimbursed tax free, where the income (excluding the amount of travel and subsistence expenses) from the directorship does not exceed €5,000.

Where the income from the directorship exceeds €5,000, this provision will not apply, in which case any expenses reimbursed will be fully taxable.

Question: 

If an employee wants to donate €250 to a charity, can this be done as a salary sacrifice?

Answer: 

No, this cannot be processed as a salary sacrifice. It should be deducted from the employee's net take home pay. The employee does not receive any tax benefit for the donation.

However, where an individual makes a donation of at least €250 in a tax year, the charity can claim back 31% tax relief directly from Revenue following the end of the tax year, subject to the employee having paid this amount of tax. The employee should submit a completed CHY3 Cert (Enduring Certificate which covers a period up to 5 years) or a CHY4 Cert (an Annual Certificate) to the charity. For example, where an employee makes a charitable donation of €250 in 2016, the charity is deemed to have received a gross donation of €362.32 (€250 / 69%). The charity can then claim a refund of €112.32 (€362.32 - €250) from Revenue, on the assumption that the employee has paid tax of at least €112.32 in 2016.

The Department of Social Protection (DSP) now provide an online appointment service via www.mywelfare.ie in order for an individual to attend his local DSP office to obtain a PPS Number or a Public Service Card. Once the appointment is made, he should print the notification and bring it to his appointment with the required documents listed in the notification. Appointments can also be rescheduled or cancelled online.

The ROS and paper version of the P45 has been revised for 2017 to include:

• A PRSI Exemption Indicator for those employees who are exempt from paying PRSI in Ireland. This should not be used for those insurable under Class M.

• A USC Exemption Indicator for those employees who are exempt from USC (i.e. where Revenue has issued a PC2 to an employer containing a USC Exemption Indicator)

• Increased options for pay frequency (0 = weekly, 1 = fortnightly, 2 = monthly, 3 = 4 weekly and 4 = other) similar to the entries on a P60.

  The ROS version of the P45 is available since 27th November 2016, and an updated paper copy (blue version) will be available in early December.

Revenue launched a Consultation Paper  on 11th October 2016 regarding the modernisation of the PAYE system.

PAYE modernisation (i.e. a move to real-time information) will be one of the most significant changes in the history of the PAYE system. The object of the modernisation is that Revenue, employers and employees have the most up to date pay, tax, USC and PRSI information. According to the consultation paper, "it is anticipated that this reporting process by employers to Revenue will be fully integrated into the employer's payroll run, thereby contributing to a significant streamlining of business processes and reducing administrative cost for employers"and the "Forms P30, P35, P45s, P46s and P60s will be eliminated".

The MB10 Form which was previously used to claim Maternity Benefit has been discontinued and replaced with a number of new forms. Employees can now apply for Maternity Benefit using an MB1 Form which is completed by the employee only and does not have to be provided to the employer.

The employer now completes an MB2 Form confirming the start date and end date of the employee's maternity leave and the employee's expected due date. The employer should also include the employer's bank details where the employee authorises that the Maternity Benefit can be paid to her employer. If the person is self-employed or has recently become unemployed, then an MB3 Form must be completed by her doctor.

The MB1, MB2 and MB3 Forms are available on the DSP website.

Employers previously completed Part 4 of the MB10 Form which gave them access to all of the employee's personal information. The MB10 Form also required employers to forecast an employee's PRSI contributions up to the commencement date of maternity leave. This is no longer required.

Applications for Maternity Benefit can also be made online using mywelfare.ie in which case the supporting Forms must be uploaded online to accompany the application.

Employers are not obliged to pay employees while they are absent on paternity leave but they can choose to do so. Similarly, employers are not obliged to pay employees while they are absent on maternity leave. However, if employers pay female employees while they are absent on maternity leave, then, they should ensure that they do not discriminate against male employees in relation to paternity leave.

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. 

Question:

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.

Answer:

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. 

 

USC FAQs

Revenue has updated their USC FAQs document in relation to the USC treatment in a Week 53 payroll. The previous version of the FAQs used the term "Pay Frequency" which has now been updated to "Pay Date". While Finance Act 2015 provides that additional USC COPs can be allocated in a Week 53 payroll, this only applies where an employee's normal pay day does not change during that tax year or the previous tax year. This rule is to prevent employers artificially creating a Week 53 payroll in consecutive years by changing the day on which employees are paid.

A Week 53 should not generally occur in consecutive years but there are some situations where it could legitimately happen (e.g. where an employee receives a promotion and is moved from a weekly payroll to a fortnightly payroll, or vice versa, and they have different pay days).

Question:  

An employee wishes to purchase a bicycle under the Cycle to Work Scheme and his employer has agreed to deduct the cost from his gross pay under the salary sacrifice arrangement. The cost of the bicycle and related safety equipment amounts to €600. The employee has asked if he can purchase some equipment for his car to bring the total spend up to the limit of €1,000 and the retailer will issue an invoice for €1,000.  Is this allowable?  

Answer:  

No, the employer is not permitted to allow the full €1,000 as a salary sacrifice. The only items that are covered under the Cycle to Work Scheme are bicycles and related safety equipment. Where an invoice is provided to an employer which purports to be for a bicycle but is in fact for other goods or services, the employee and/or the retailer involved may be liable to a penalty of €3,000.

The Department of Finance has opened a consultation on the "Taxation of Share Based Remuneration". This consultation is in response to the recently published Programme for Partnership Government which outlines a commitment to explore the mechanisms through which SMEs can reward key employees with share options in a tax efficient manner.

Question:

An employee is currently paying nursing home fees for his elderly mother. What tax relief is he entitled to claim in respect of these fees and how does he obtain it?

Answer:

Nursing home fees qualify for tax relief at the employee's marginal (highest) rate of tax. Normally tax relief for health expenses is claimed following the end of the year on PAYE Anytime or by completing a Med 1 form. However, for PAYE taxpayers, in certain circumstances Revenue may grant tax relief during the tax year. The taxpayer should contact his local tax office with the relevant details. In order to qualify, the nursing home must provide qualified nursing care on-site on a 24 hour basis.

Despite being told that Ireland’s recovery is well under way, people continue to lose their jobs. Paddy Power, for example, is said to have plans to cut its Irish staff by up to 300 following its merger with Betfair earlier this year; 700 of Tesco’s longest serving workers have accepted redundancy rather than move to new contracts, while staff at Intel in Leixlip have been informed of possible redundancies as part of a worldwide staff culling to the tune of 10,000 workers.

So what exactly is redundancy, and what does it entail?

There are three types of redundancy – voluntary, forced andcollective. Basically speaking, an employee is made redundant when staff numbers are being cut or when a business is being shut down. Minimum payments that must be provided by employers are set out by the Redundancy Payments Acts 1967-2012, which states that employees are entitled to two weeks’ pay for every year of service (maximum €600 per week), plus a bonus week’s pay. The statutory payment isn’t subject to tax, though if your redundancy package exceeds this level, it may be. The Department of Social Protection offers a handy redundancy calculator to assess what you should receive from your employer.

You will have to meet a number of criteria:

1. Be aged 16 or over. 2. Be in insurable employment under Social Welfare Acts, with full-time employees under 66 years of age required to be paying Class A PRSI. 3. Have a continuous work history with your employer for 104 weeks (two years) from age 16 and older. This isn’t affected by factors such as maternity, adoptive, parental or carer’s leave, leave through illness, holidays or being laid off, being on strike or locked from your place of employment, or if you’re an agency employee.

Part-time employees are also entitled to redundancy payments under the Redundancy Payments Act 2003. Employees who have been laid off or are experiencing short time (pay or hours reduced to less than half than is normal) for four weeks or more can let their employer know of their intention to claim redundancy. If you don’t get a counter-notice within seven days, you could be eligible for a redundancy payment.

Employers must give at least two weeks’ notice for redundancies, with this time increasing depending on the amount of years served. If the employer hasn’t paid by this date, or you think you’ve received an unfair sum, you can apply for this to your employer by filling out the RP77 form.

If they still refuse to pay it, employees can apply directly to the Department of Social Protection for payment from the Social Insurance Fund using the RP50 form. If your employer is unable topay, have them sign the form and submit a letter from either a solicitor or accountant confirming their inability to pay.

For further details, queries payment refusals or disputes, employees can get in touch with the Workplace Relations Commission – disputes must be raised within one year of your termination.

The date of payment of Illness Benefit determines the tax year in which it should be taxed. If Illness Benefit is paid in 2016, it is taxable in the 2016 payroll. This does not pose a problem for the majority of Illness Benefit payments which are paid during a tax year.

Where Illness Benefit was paid in 2015, it was generally taxable in 2015. However, where Illness Benefit was paid in late December (after the December payroll had already been processed), employers were not required to deal with the taxation of this payment. The employer was not required to amend his December payroll to include this amount of Illness Benefit, nor should the employer carry this Illness Benefit forward to a 2016 payroll. Revenue will deal with the taxation of these Illness Benefit payments directly with the employee following the end of the tax year.

Question: 

An employee has been absent on sick leave for a number of weeks. His employer does not operate a sick pay scheme and the employee did not meet the qualifying conditions to claim Illness Benefit from the Department of Social Protection. Is the employee entitled to a refund of tax and USC while absent?

Answer: 

Where an employee is absent on sick leave, and is not due any payment from his employer on his normal pay day, he is entitled to request his employer to make any tax and/or USC refund due, assuming the employer holds a cumulative tax credit certificate for that employee. Where such a request is made, the employer is obliged to issue any refund due on the normal pay day. If no request is made by the employee, the employer is not obliged to issue any refund.  

A revised version of the PRSIREF1 Form  is now available on the Department's website. This form should be used by those individuals looking to claim a refund of PRSI in respect of any of the last 4 tax years. Some examples giving rise to a PRSI refund include:

• Class A PRSI incorrectly applied to an employee aged 66 or over,
• Those who hold a Form A1,
• Those who paid legally enforceable maintenance to a spouse or partner.

Question: An employee has been awarded a general purpose loan from his employer who is going to charge the employee 13.5% interest on the loan. What is the taxable BIK arising in respect of this loan?

 

Answer: As the employer is charging the employee 13.5% interest, a taxable BIK does not arise for the employee as the interest rate charged by the employer is equal to the specified interest rate set by Revenue. A taxable BIK would only arise where the employer charged the employee an interest rate which was lower that the Revenue specified rate (i.e. the Revenue specified rate less the rate charged by the employer to the employee is a taxable BIK).

Question:

An employee received a voluntary severance package in 2012. The individual has now received correspondence from the company defined benefit pension scheme stating that the scheme is to be wound up. As the individual is over 50 years of age, he was offered the option of retiring and receiving his benefits early, as well as various transfer options.

The individual has queried why he was not given the option of receiving a tax free lump sum from the pension scheme, as some of his former colleagues had received this option.  

Answer:  

On checking the calculation of the tax free portion of the employee's voluntary severance payment, it was discovered that the employee chose to avail of highest tax free amount available under the Standard Capital Superannuation Benefit (SCSB) calculation. This option involved the employee making a decision to give up his right to receive a tax free lump sum from the pension fund on retirement. As the pension scheme is being wound up now, he has the option of receiving his pension commencing immediately (as he is over 50 years of age), but he is not entitled to a tax free lump sum.

The reason that some of his colleagues received the option of a tax free lump sum is because they made a decision to retain their entitlement to a tax free lump sum from the pension scheme when their employment was terminated, hence this would have result in a higher portion of their severance package at that time being taxable.

Question: 

An employee left our employment on Friday 15th January. The employee asked for his P45 to be issued to him on his leaving date as he was starting his new job on Monday 18th January and needed it to give to his new employer. Our employees are paid on the 25th of each month and we normally only issue P45s after the employees have received their final payment.

Is the employee entitled to request his P45 on his date on leaving, or can I wait and issue it following the pay date?   

Answer: 

Employers should finalise all payments due to an employee, and in accordance with the PAYE Regulations, a P45 should be issued to an employee immediately on cessation. In the above example, the employee is correct to request his P45 on his date of leaving.

• Question:  

  My employer has recently undergone a change of ownership which has resulted in a new employer registration number being issued by Revenue. What process should be followed to transfer the employees to the new employer registration number?

  Answer:  

  This is a cessation of employment under the old employer registration number and a commencement under the new employer registration number.

  A P45 (Part 1) should be filed for each employee under the old employer registration number to inform Revenue that the employees ceased to be employed by that employer.

  A P45 (Part 3) should also be filed to register each employee under the new employer registration number and Revenue will issue updated Tax Credit Certificates (P2Cs) for each employee under the new registration number.

  To ensure the employee has a complete PRSI record for the year, P45 (Part 4) should be given to the employee as the P60 issued at the end of the year will only contain the PRSI information relating to the new employer registration number. The P60 will contain the total taxable and gross pay, tax and USC, with a breakdown between the current and previous employment.

  Taxation of Illness Benefit

  Revenue has updated the Employer's guide to PAYE in relation to the taxation of Illness and Occupational Injury Benefit 

  Particular attention should be given to the section relating to Illness Benefit which is paid at the end of the tax year. Details of the taxable Illness Benefit received prior to the closing off of the final payroll for 2015 should be recorded in this final pay period.

  An employer is not required to deal with the taxation of Illness Benefit relating to 2015 which is received by the employer following the closure of the final 2015 payroll. Revenue will deal with the taxation of these amounts directly with the employees concerned.

  Only Illness Benefit relating to 2016 should be included in 2016 payrolls. Employers should not tax 2015 Illness Benefit in a 2016 payroll, however employers may need to take the amount of Illness Benefit into account in determining the amount of sick pay to be paid to an employee.

  Zero Hours Contracts

  Minister Nash has also published a report entitled "A Study on the Prevalence of Zero Hours Contracts among Irish Employers and their impact on Employees". Some of the key findings of the report are as follows: 

• Zero hours' contracts as defined in law are not extensively used.

• There is evidence of "if and when" contracts being used. 

The main difference is that workers on zero hours' contracts are obliged to make themselves available for work whereas workers on "if and when" contracts are not obliged to make themselves available for work.

The report found that the main advantage of "if and when" contracts to employers is flexibility and reduced cost. Trade unions argued that some of the negative impacts for workers on these contracts included: 

• Unpredictability of hours,

• Unstable income and difficulty accessing credit,

• Insufficient notice when called to work, and

• Difficulty in accessing Social Welfare benefits. 

Some of the recommendations made in the report are as follows:

• Employees should receive a written statement of terms and conditions of employment on their first day of employment,

• There should be a minimum of 3 consecutive hours where an employee is required to work or he should be paid for the 3 hours,

• Employers should give at least 72 hours' notice of work unless it is due to exceptional circumstances,

• If an employee undertakes the work without the minimum notice he should be paid 150% of the rate they would have been paid,

• Employees should receive a minimum of 72 hours' notice of cancellation of hours and if they don't they should be paid for the scheduled hours, and

• Periodic reviews should be carried out so that a contract reflects the reality of working hours. 

A consultation process on "if and when" contracts will now be undertaken with recommendations to be made in 2016.

Question:

I make a contribution to my employer's occupational pension scheme each year of 5% of my salary. I have heard recently that if I make an additional contribution in 2015, outside of payroll, that I can elect to have it offset against my 2014 income for tax relief purposes. Is this correct?

Answer:

Yes, subject to the condition that the contribution is made before the income tax self-assessment deadline (31st October or 12th November where the income tax return is paid and filed on ROS) and subject to the age related tax deductible contribution limits that applied in 2014.

For example, if an individual made a contribution to a pension scheme in October 2015, he can elect to claim tax relief on this contribution for 2014, even though the contribution was made after the end of that tax year. The individual can claim tax relief by submitting a Form 11 or Form 12 to Revenue, or via PAYE Anytime as appropriate.

This applies to contributions to any type of pension arrangement (Occupational Pension Scheme, Personal Retirement Savings Account or Retirement Annuity Contract).  

Retun to home page

Regulations aim to redefine the status of service charges in the calculation of the average hourly pay rate. Specifically, service charges will no longer be considered as a factor when determining the hourly pay rate for employees in certain sectors covered by the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022. The sectors affected by this reclassification include hotels, cafes, restaurants, bookmakers, casinos, hairdressing, and others. This change ensures that employers in these sectors cannot include service charges when calculating an employee's hourly pay rate in accordance with the National Minimum Wage Act 2000.