Employers Tax

As you’re aware, the Income Tax / self-assessment Tax Return filing deadline is 31st October 2024.

There is an extension to 14th November 2024 providing you file both (i) your 2023 Income Tax Return and (ii) the Income Tax Balance due for 2023 as well as your 2024 Preliminary Tax payments though ROS.

You should register for Income Tax self-assessment if:

1. You are self-employed.
2. Your only or main source of income is from (a) Rental income, (b) Investment income, (c) Foreign income, (d) Maintenance payments, (e) Fees that are exempt from PAYE or (f) if you have profited from share options or share incentives.

You are obliged register for Income Tax purposes if

• Your taxable non-PAYE income exceeds €5,000 or
• Your gross non-PAYE income exceeds €30,000.

If you do not use ROS to file your Income Tax Return , the tax deadline remains 31^st October 2024.

What’s new in the 2023 Income Tax Return?

NON RESIDENT LANDLORDS

The Non-Resident Landlord Withholding Tax (NLWT) system came into operation on 1^st July 2023.

Collection agents of non-resident landlords may opt to use the NLWT system.

The 2023 Form 11 Income Tax Return contains a new section that should be pre-populated, providing the gross rental income figure and the withholding tax which have been processed through the NLWT.

For further information, please click: https://www.revenue.ie/en/property/rental-income/nlwt/index.aspx

For complete information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

MORTGAGE INTEREST TAX CREDIT

This credit was introduced for 2023 only.

This tax credit is for taxpayers who have made payments in respect of a qualifying loan for a principal private residence.

A new section has been added to 2023 Form 11 Tax Return for the purposes of claiming of the Mortgage Interest Tax Credit.

The relief is available to homeowners, who as of 31^st December 2022, with an outstanding mortgage balance of between €80,000 and €500,000 and meet the necessary conditions.

For further information, please click: https https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/mortgage/index.aspx

For complete information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-11B.pdf

What happens if you miss the Tax filing date?

If you fail to meet the October 31^st Income Tax Return deadline, you could be liable to an interest charge for each day you’re late.  Statutory Interest on the overdue tax liability is calculated at 0.0219% per day or part thereof.

This is in addition to a surcharge:

1. If you file your 2023 Form 11 Tax Return after 31st October 2024 but before 31st December 2024 the surcharge will be calculated as the lesser of (a) 5% of the tax due or (b) €12,695.
2. If, however, your 2023 Tax Return is submitted after the 31st December 2024, the surcharge will be (a) the lesser of 10% of the tax liability due or (b) €63,485.

Important Points to keep in mind:

1. Any underpayment of your Income Tax liability will result in interest penalties arising.

2. In order to avoid interest on overdue taxes, you must ensure that your Preliminary Tax is both (a) correct and (b) paid on time. If, for example, you pay a sufficient amount of Preliminary Tax but it’s paid after the tax deadline, then interest may accrue.

3. A late filing surcharge is computed on the full tax liability arising in the year of assessment. It does not take into consideration any advance payments / payments on account.

To get your tax return filed before the income tax deadline, please contact us on queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

On 20^th October 2023, the Supreme Court delivered its unanimous decision in The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza [2023] IESC 24 (the “Karshan Case.”  It was held that delivery drivers of Domino’s Pizza should be treated as employees and not independent contractors.  Today Revenue published their “Guidelines for Determining Employment Status for Taxation purposes” which outlines a five step decision making framework to determine the employment status of individuals for tax purposes: eBrief No. 140/24

According to Revenue:

“Where an individual is engaged under a contract of service, i.e., as an employee taxable under Schedule E, income tax, USC and PRSI should be deducted from his or her employment income through their employer’s payroll system on or before when a payment is made.

Where an individual is engaged under a contract for service, i.e., as a self-employed individual taxable under Schedule D, he or she will generally be obliged to register for self-assessment, to pay preliminary tax and file their own income tax returns using the Revenue Online Service (ROS).”

The guidance material asks the following questions:

1. Does the contract involve the exchange of a wage or other remuneration for the work carried out?

In other words, there must be an exchange of work for wage/remuneration before a working relationship can be categorised as a “contract for service.”

A contract is considered to be an engagement where there is a payment by the business to the individual regardless of whether or not there is a written contract in place.

2. If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?

This test distinguishes between a situation where a worker provides services to a business personally versus where it’s possible for that worker to engage others to provide the services on his/her/their behalf.

3. If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?

The court judgment placed a strong emphasis on the degree of freedom the individual has to decide how the work is carried out.

It is essential to establish the level of control the business has over the individual worker.  For example, can it decide what the particular duties are, as well as how, when and where the work should be carried out?

Is the worker carrying on the business of the organisation he/she/they work(s) for or is this individual working on their own account?

In other words, to what degree is the worker/individual integrated into the business?

4. If the above three requirements are satisfied, the decision maker must then determine whether the terms of the contract between employer and worker and the related working arrangements are consistent with an employment contract, or with some other form of contract.

Apart from reviewing any written agreement in place, it is vital that the facts of the working arrangement are examined to establish if the individual is working for the business or is providing services on his/her/their own account.

5. Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.

If the answer to any of the first three questions set out above are “No”, a contract of employment is not deemed to exist and the individual should not be treated as an employee.

If, however, the answer to the first three questions is “Yes”, then questions 4 and 5 of the framework must be considered to determine if a contract of employment exists.

The Guidelines also include nineteen practical examples which demonstrate the application of the five step framework to assist in determining how workers, in a number of different situations, will be taxed.

Conclusion:

• If required by Revenue, taxpayers must be able to demonstrate, using the five step framework, how they determined that a worker should be treated as self-employed rather than as an employee.

• If a business previously treated a worker as self-employed rather than as an employee, but having reviewed the five-step framework it would appear that this individual is in fact an employee for tax purposes, the business must immediately rectify the situation by operating payroll taxes.

• If the business has incorrectly treated the worker as a self-employed contractor rather than as an employee, the Revenue Commissioners may seek the repayment of uncollected payroll taxes, Employer’s PRSI as well as interest and penalties.

• It is advised that businesses carry out an urgent and comprehensive review of the five step framework to determine employment status of their workers.

If you require any assistance, please contact us.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

From 1^st January 2024 employers will be required to report, collect and remit Income Tax, USC and PRSI, under the PAYE system, on any gains arising on the exercise, assignment or release of unapproved share options by employees and/or directors.  From 1^st January 2024, the tax collection method for share option gains will become a real-time payroll withholding obligation for the employer instead of the individual self-assessment system known as the Relevant Tax on Share Options (RTSO) system.

These new rules are a welcome development for employees and directors who, from 1^st January 2024, will no longer be responsible for filing and submitting Income Tax, USC and PRSI arising on the exercise of their share options.

Employees may still, however, be required to file an Income Tax Return for a relevant tax year, if that individual remains a “chargeable person.”

The due date for such returns is 31st March 2024 and there are different returns required depending on the type of share scheme operated / share remuneration provided.

Penalties for failure to file Returns may apply.

The following Forms are required for the following share schemes:

1. Form RSS1 for share options and any other rights to acquire shares or assets awarded to employees and Directors. https://www.revenue.ie/en/employing-people/documents/form-rss1.xlsm

2. Form KEEP1 – Key Employee Engagement Programme (KEEP) – Details of qualifying share options granted. https://www.revenue.ie/en/employing-people/documents/form-keep1.xlsm

3. Form ESOT1 – Employee Share Ownership Trust (ESOT) – Details of approved Employee Share Ownership Trust (ESOT) schemes. https://www.revenue.ie/en/employing-people/documents/form-esot1.pdf

4. Form ESS1 for details of Approved Profit Sharing (APSS) schemes. https://www.revenue.ie/en/employing-people/documents/form-ess1.xlsm

5. Form SRS01 for details of Save As You Earn Schemes (SAYE) https://www.revenue.ie/en/employing-people/documents/form-srso1.pdf

6. Form ESA – Restricted Stock Units (RSUs), Discounted / Free / Matching Shares, Employee Share Purchase Plans (ESPP), Restricted Shares, Convertible Shares, Forfeitable Shares, Phantom Shares, Stock Appreciation Rights, Growth/Hurdle/Flowering Shares and other Shares. https://www.revenue.ie/en/employing-people/documents/form-esa.xlsm

In circumstances where employers have globally mobile employees working outside Ireland for part of the year, the gains arising on the exercise of the stock option may need to be apportioned based on the number of days those employees worked in Ireland during the grant to vest period.  Employers will need to monitor the Irish workdays for these employees throughout the entire vesting period of the options.  Employers will also need to determine whether the stock option gain is exempt from PRSI.

Consideration must be given as to how the tax liabilities will be funded, especially in situations where there is insufficient income to cover the payroll taxes, where the globally mobile employee is not subject to Irish tax at the date of exercise but a portion of the gain has given rise to an Irish tax liability or where the employee or director has ceased their employment with the organisation. For example, by introducing a “sell to cover” mechanism.

In Summary:

• The RTSO system will be abolished with effect from 1^st January 2024.

• From 1^st January 2024, taxes arising on stock option gains will be collected through the payroll system.

• Currently there are no proposed changes that affect the obligation to file an annual RSS1 informational return by the employer. Therefore, the reporting obligations for share options by employers remain due on or before 31^st March of the following tax year.

• Share Option gains realised before 31^st December 2023 will be liable to tax under the self-assessment system with the employee being responsible for filing a Form RTSO1 along with the relevant tax payment within 30 days of the date of exercise.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

The Special Assignee Relief Programme (“SARP”) was introduced on 1^st January 2012 to provide Income Tax Relief for eligible employees assigned to work in Ireland from abroad.  It was due to expire for new entrants on 31^st December 2022, however, Finance Act 2022 extended the relief for a further three years, up until 31^st December 2025.

Prior to 1^st January 2023, an individual was required to earn a minimum basic salary of €75,000 per annum (excluding all bonuses, benefits or share based remuneration) in order to be eligible for SARP.

From 1^st January 2023 onwards the employee must have a minimum base salary of €100,000 per annum.  This amount excludes all bonuses, commissions or other similar payments, benefits or share-based remuneration.

A number of conditions need to be satisfied for this relief to apply, as follows:

1. The individual must be an employee of either (i) a company incorporated and tax resident in a country with which Ireland has a Double Taxation Agreement/Exchange of Information Agreement or (ii) an associated company of a relevant employer. The individual must arrive in Ireland in any of the tax years, from 2012 to 2025, at the request of his/her/their employer, to perform employment duties in Ireland for that employer or with an associated company of that employer.

2. The individual must have been employed by a relevant employer for six months immediately prior to arriving in Ireland.

3. The individual must perform employment duties in the State for at least twelve consecutive months from the date of arrival in Ireland.

4. The employee must not have been tax resident in Ireland for the five tax years preceding the year of arrival.

5. The individual must be Irish tax resident, although he/she/they may also be tax resident in another country.

6. The individual must be tax resident in Ireland for all years for which he/she/they claim the relief.

7. When applying, SARP applicants must have a PPS number issued to them.

8. Within ninety days of the individual’s arrival in Ireland, the employer must submit the SARP application (SARP 1A) to Revenue’s SARP Unit, certifying that all the above conditions have been met for the relief to apply. In addition, the employer company must have complied with the normal PAYE employee commencement regulations.

9. If the individual is not Irish tax resident in the year of arrival, Relief may start from the following year.

Example

Mark arrived in Ireland from USA on 17^th October 2019 on a 5-year contract.

He was not Irish tax resident in 2019.

As Mark was tax resident in Ireland in 2020, he was entitled to claim relief under SARP.

His first year of claim was, therefore, 2020.

He can continue to claim SARP up to and including 2025 if he continues to satisfy the relevant conditions for the Relief.

SARP Relief

The relief operates by:

• exempting, from Income Tax,
• 30% of a qualifying employee’s annual employment income above a qualifying income threshold (€75,000 prior to 1^st January 2023 and €100,000 from 1^st January 2023 onwards),
• Subject to an earnings cap (since January 2019, an earnings cap of €1m has been in effect),
• for a period of 5 years.

Relief is not extended to Universal Social Charge (USC) so the individual must pay USC on the full amount of his/her/their salary.

The specified amount is not exempt from PRSI, unless the employee is relieved from paying Irish PRSI under either an EU Regulation or under a bilateral agreement with another jurisdiction.

The relief operates by providing a deduction for income tax purposes from remuneration based on the following formula:

(A-B) X 30%

A = Qualifying Remuneration i.e. total remuneration.  This includes:

• Income, profits or gains from his/her/their employment in the State with a relevant employer or associated Company.
• Allowances, benefits-in-kind, bonuses, share awards, commissions, etc.
• The following is deductible from the total remuneration figure when calculating the Relief: employee contributions to an Irish approved pension plan or a foreign pension plan eligible for Irish tax relief as well as remuneration eligible for Double Taxation Relief in Ireland.

B = €100,000 (prior to 1st January 2023 it was €75,000)

Example:

Thomas arrived in Ireland on 1st January 2023 and meets all the above conditions to qualify for SARP relief.

His salary is €120,000, his bonus is €15,000 and he receives a benefits in kind (e.g. medical insurance) valued at €3,000.

A = €138,000 i.e. €120,000 + €15,000 + €3,000

B = €100,000 i.e. qualifying Income Threshold

SARP Deduction = (€138,000 – €100,000) = €38,000 @ 30% = €11,400

Thomas’s marginal Income Tax rate in Ireland is 40%, therefore his Income Tax saving is €4,560 i.e. €11,400 x 40%

It’s important to keep in mind that 8% USC and 4% PRSI, if applicable, will apply to this employment income.

Important Points to keep in mind:

1. Revenue recently clarified that employees must have at least one Irish workday each month in the first twelve months. Therefore, all employees eligible for SARP should take account of this when making travel arrangements in their first year in Ireland so as to ensure their SARP Relief isn’t withdrawn.

2. In the case of new applicants arriving in Ireland from 1^st January 2023 onwards, please be aware that the portion of employment income which is eligible for Relief is 30% of their annual employment income above €100,000. For qualifying employees who arrived in Ireland before 1^st January 2023, however, their relief calculated as 30% of their annual employment income above €75,000.

3. Employees who qualify for SARP Relief are also eligible to receive certain travel expenses and certain costs associated with the education of their children in Ireland tax free.

4. Employees who have started their Irish role before actually arriving in Ireland, will not be entitled to claim SARP relief, unless (i) the employee was prevented from travelling to Ireland to take up his/her/their position here due to unforeseen circumstances beyond his/her/their control and (ii) the Irish employment duties carried out by the individual abroad do not exceed five “workdays” in the six months period prior to his/her/their arrival in Ireland.

5. Employees must have a PPS number when making their application.

6. Individuals should register their employment with Revenue before applying for SARP.

7. The SARP Relief cannot be claimed by new hires with no previous group employment history.

EMPLOYEES

SARP relief can be claimed by the employee in one of two ways:

1. Through the year-end Tax Return

An employee who receives SARP Relief is considered to be a “chargeable person” for Income Tax purposes.  He/she/they is/are required to submit an Income Tax Return to the Irish Revenue Commissioners in respect of each year for which relief is claimed.   The Form 11 Tax Return may be filed by way of a paper form or through the Revenue’s On-Line Service (ROS).

Employees who have registered and qualify for SARP must file a Form 11 Tax Return by 31st October following the end of the tax year.

2. Through payroll

By completing Part C of Form SARP 1A and submitting it to Revenue, SARP Relief can be granted at source through the employee’s payroll.

The employer is required to make this application only once.

Relief can be granted at source through payroll for the duration of the assignment, up to a maximum of five years, providing the employee continues to satisfy all the relevant conditions.

If you would like further information on the new SARP regime, please contact us to make an appointment.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Today, 14th April 2022. the Irish Revenue published guidance (Revenue eBrief No. 090/22) on the tax treatments of Ukrainians, who continue to be employed by their Ukrainian employer while they perform the duties of their employment, remotely, in Ireland.

The Guidance material outlines a number of concessions which will apply for the 2022 tax year.

PAYE

As you’re aware, income earned from a non-Irish employment, where the performance of those duties is carried out in Ireland, is liable to Irish payroll taxes irrespective of the employee’s or employer’s tax residence status. However, by concession, the Irish Revenue are prepared to treat Irish-based employees of Ukrainian employers as not being liable to Irish Income Tax and USC in respect of Ukrainian employment income that is attributable to the performance of duties in Ireland.

Ukrainian Employers will not be required to register as employers in Ireland and operate Irish payroll taxes in respect of such income.

Please be aware that this concession only relates to employment income which is (a) paid to an Irish-based employee (b) by their Ukrainian employer.

In order for the above concessions to apply, two conditions must be met:

1. The employee would have performed his/her/their employment duties in Ukraine but for the war there and
2. the employee remains subject to Ukrainian income tax on his/her/their employment income for the year.

Corporation Tax

The Irish Revenue will disregard for Corporation Tax purposes any employee, director, service provider or agent who has come to Ireland because of the war in Ukraine and whose presence here has unavoidably been extended as a result of the war in Ukraine.

Again, such concessionary treatment only applies in circumstances where the relevant person would have been present in Ukraine but for the war there.

For any individual or relevant entity availing of the concessional tax treatment, it is essential that he/she/they retain any documents or other evidence, including records with the individual’s arrival date in Ireland, which clearly shows that the individual’s presence in Ireland and the reason the duties of employment are carried out in the state is due to the war in Ukraine.  These records must be retained by the relevant individual or entity as Revenue may request such evidence.

For further information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2022/no-0902022.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

On 21st December 2021, the Government announced the expansion of supports for businesses impacted by public health restrictions that came into effect from 20th December 2021 to 31st January 2022 including changes to:

1. the Employment Wage Subsidy Scheme (EWSS)
2. the Covid Restrictions Support Scheme (CRSS) and
3. the Debt Warehousing Scheme

A summary of the developments to the schemes is outlined below.

1. The Employment Wage Subsidy Scheme (EWSS)

On 9th December 2021 it was announced that the enhanced subsidy rates under the EWSS will continue until 31st January 2022.  In other words these enhanced rates will be paid in respect of payroll submissions which have pay dates in December 2021 and January 2022.

Today, Minister Donohoe confirmed that the EWSS will also be reopened for certain businesses who would not otherwise be eligible for the scheme.

Employers can re-join the scheme from January 2022 if they meet the following conditions:

1. they previously claimed support under EWSS which they were correctly entitled to
2. they anticipate that their combined turnover for December 2021 and January 2022 will be down by at least 30% as compared with their combined turnover for December 2019 and January 2020.
3. for businesses established between 1st May 2019 and 31st December 2021 their average monthly turnover for December 2021 and January 2022 must be down by at least 30% when compared with the average monthly turnover across the period August 2021 to November 2021 or on a pro-rata basis in circumstances where the business was established during this period.
4. The business must have tax clearance.

Employers who qualify for re-entry to the EWSS will receive support from 1st January 2022 onwards. These businesses can remain in the scheme until its expiry date of 30th April 2022.

Please bear in mind that the business must experience a 30% reduction in (a) turnover or (b) customer orders during a particular reference period to qualify.

Businesses that commence trading operations from 1st January 2022 onwards will not be eligible for the scheme.

For further information, please click: https://www.revenue.ie/en/corporate/press-office/budget-information/2021/crss-guidelines.pdf

2. The Covid Restriction Support Scheme (CRSS)

From 20th December 2021, the CRSS opens to businesses within the hospitality and indoor entertainment sector such as bars, restaurants and hotels as well as theatres and cinemas that are now required to close by 8pm each night until 31st January 2022.

The eligibility criteria regarding the reduction in turnover has also increased to no more than 40% of 2019 turnover.  Previously it was no more than 25% of the 2019 turnover.

Companies, self-employed individuals and partnerships that carry out a taxable trade can apply for the CRSS.

A qualifying person who meets the revised eligibility criteria can make a claim to Revenue in respect of each week that the eligible business/trading activity is affected by the imposed Covid restrictions.

A qualifying person who carries on such a business is eligible to make a payment claim under the Covid Restrictions Support Scheme if:

• the weekly turnover from the relevant business activity in the claim period will be no more than an amount equal to 40% of the average weekly turnover in a reference period.
• For most businesses the reference period will be 2019.
• For businesses established between 26th December 2019 and 26th July 2021, the reference period will depend on the date on which the business was established.
• the eligible business must have tax clearance for the relevant claim period and must intend to resume trading after the Covid-19 restrictions have been lifted.

For businesses established in the period between 13th October 2020 and 26th July 2021, they are eligible to apply for support under the scheme, however, they are first required to register for CRSS via ROS.  It will only be possible to make a claim once the business has an active CRSS registration.

If the eligible business meets the revised criteria to qualify for the scheme and has previously received CRSS payments in relation to a business premises carrying out a trading activity which was affected by the current public health restrictions, this business can make a CRSS claim using the ROS e-Repayments facility from 22nd December 2022.

Claims can be made in blocks of up to three weeks at a time.  The respective amounts due will be paid by Revenue in one single payment. The normal repayment period is three days from the date the claim was submitted.

In circumstances where a qualifying person carries on more than one eligible business activity from separate/different business premises, then it is possible to make a separate claim in relation to each trading /business activity.

If it’s possible for the business to reopen without having to prevent or significantly restrict access to it’s premises, then this business will not qualify for CRSS.  A business will not be eligible for the CRSS for periods where it chooses or decides not to open.

In situations where it is not feasible for a qualifying person to continue carrying on a relevant business activity during the period of restrictions, a claim for support under the CRSS can still be made.  This is on condition that the eligibility criteria have been met. In order to qualify, the person must have actively carried on the relevant business activity up to the date the latest public health restrictions were imposed and must intend to continue carrying on that same activity once those restrictions have been eased.

The weekly payment is calculated as follows

• 10% of average weekly turnover up to €20,000 i.e. €2,000
• 5% of average weekly turnover in excess of €20,000 up to a maximum of €60,000 i.e. €3,000
• The maximum payment is €5,000 per week.

For the purposes of the CRSS, the “Average weekly turnover” is defined as:

• the average weekly turnover in 2019 in the case of a business established before 26th December 2019,
• the average weekly turnover between 26th December 2019 and 12th October 2020 in the case of a business established during that period, or
• the average weekly turnover in the period 13th October 2020 to 26th July 2021 in the case of a business established during that period.

For further information, please click the link: https://www.revenue.ie/en/corporate/press-office/budget-information/2021/crss-guidelines.pdf

3. Debt Warehousing Scheme

The Revenue Commissioners have confirmed that November/December 2021 VAT liabilities and December 2021 PAYE (Employer) liabilities will be automatically warehoused for businesses which are already availing of the scheme.

The Government confirmed that the Covid restricted trading phase of the Debt Warehousing Scheme (Period 1) will be extended by three months to 31st March 2022 for taxpayers who are eligible for the COVID-19 support schemes. This effectively means that tax debts arising for such affected businesses in the first three months of 2022 can be warehoused.

The zero interest phase of the Debt Warehousing Scheme or Period 2 will begin on 1st April 2022 for those businesses and will run until 31st March 2023.

For further information, please click the link: https://www.revenue.ie/en/corporate/communications/documents/debt-warehousing-reduced-interest-measures.pdf

The Finance (Covid-19 and Miscellaneous Provisions) Bill 2021 has extended the Employment Wage Subsidy Scheme (EWSS) until 31st December 2021.

It also amended the comparison periods for determining eligibility for EWSS for pay dates from 1st July 2021.

The main criterion for eligibility is that employers must be able to prove that they were operating at no more than 70% of either (a) turnover or (b) customer orders received for the period 1st January to 30th June 2021 as compared with 1^st January to 30^th June 2019.  It must also be able to clearly demonstrate that this disruption was caused by Covid19.

In other words, an employer must be able to show, to the satisfaction of Revenue Commissioners, that their business is expected to suffer a 30% reduction in turnover or customer orders, which was due to Covid19.

Simultaneously, Revenue introduced a new requirement for employers to submit a monthly Eligibility Review Form (ERF) on ROS.  The ERF requires (a) data relating to actual monthly VAT exclusive turnover or customers order values for 2019 in addition to actual and projected figures for 2021 for all relevant businesses as well as (b) a declaration.

The initial submission should be made between 21st and 30th July 2021 and by 15th of every month from August onwards.

On 15th of every month during the operation of this scheme, employers will be required to provide the actual results for the previous month, together with a review of the original projections they provided so as to ensure they continue to remain valid.

The eligibility for EWSS must be reviewed on the last day of each month.  If the business is deemed ineligible, then that business must de-register for EWSS from the following day.

If, however, the situation changes, then the business can re-register again.

The following subsidy rates, based on employee’s gross pay per week, will continue to apply for the months of July, August and September 2021 as follows:

• €400 and €1,462 gross per week, the subsidy is €350
• €300 and €399.99 gross per week, the subsidy is €300
• €203 and €299.99 gross per week, the subsidy is €250
• €151.50 and €202.99 gross per week, the subsidy is €203.

Additional Points:

1. EWSS support is available for Employers with a valid Tax Clearance Certificate, providing they can demonstrate that the Covid-19 Pandemic disrupted their business resulting in a reduction in their turnover or customer orders by at least 30%.
2. Childcare businesses which have been registered in line with Section 58C of the Child Care Act 1991, are not required to meet the 30% reduction in turnover or customer order test to be eligible.
3. As and from 1st July, 2021, the eligibility criteria for the scheme will be calculated with reference to a twelve month period, as opposed to the six month period, as before.
4. Revenue requires employers to retain appropriate documentation, including copies of projections, to demonstrate continued eligibility over the specified period.
5. Employers must operate normal deductions of Income Tax, USC and employee PRSI from employees’ wages/salaries on all EWSS payments through the payroll. A reduced rate of employer PRSI of 0.5% applies in relation to wages/salaries which are eligible for the subsidy payment.
6. If an employer fails to complete and submit the EWSS Eligibility Review Form, this will result in the suspension of EWSS subsidy payments by Revenue.

For further information please visit: https://www.revenue.ie/en/employing-people/ewss/how-to-claim-for-employees-and-subsidy-rates.aspx 

In response to the Covid-19 outbreak in Ireland, the Government has asked people to take all necessary measures to reduce the spread of the virus and where possible individuals are being asked to work from home.

Today Revenue updated their e-Working and Tax guidance manual (i.e. Revenue eBrief No. 045/20) in which it published Government’s recommendation as to how employers can allow employees to work from home.

The content of Tax and Duty Manual Part 05-02-13 has been updated to include:

• An explanation of what constitutes an e-worker along with examples.
• The conditions that apply to employer payments of home expenses of e-workers.
• Clarification that current Government recommendations for employees to work from home as a result of COVID-19 meet the conditions for relief.
• Guidance for employees claiming relief for allowable e-working expenses, who are not in receipt of e-working payments from their employers.

Revenue has defined e-working to be where an employee works:

• at home on a full or part-time basis
• part of the time at home and the remainder in the normal place of work
• while on the move, with visits to the normal place of work

The guidance material goes on to state that e-working involves:

• logging onto a work computer remotely
• sending and receiving email, data or files remotely
• developing ideas, products and services remotely

The revised Revenue guidance clarifies that the following conditions must also be met:

• There is a formal agreement in place between the employer and the employee under which the employee is required to work from home
• An employee is required to perform substantive duties of the employment at home; and
• The employee is required to work for substantial periods at home

The guidance confirms that e-working arrangements do not apply to individuals who in the normal course of their employment bring work home outside standard working hours.

It would appear from the updated material, that where there is an occasional and ancillary element to work completed from home, the e-working provisions will not apply.

The revised guidance does not specify what a “formal agreement” between the employer and employee might contain therefore it would be advisable for businesses/employers going forward to consider putting in place a formal structure for employees looking to avail of the e-worker relief in the future.

The guidance material states in broad terms that employees forced to work from home due to the Covid crisis can claim a tax credit.

“Where the Government recommends that employers allow employees to work from home to support national public health objectives, as in the case of Covid-19, the employer may pay the employee up to €3.20 per day to cover the additional costs of working from home.  If the employer does not make this payment, the employee may be entitled to make a claim under section 114 TCA 1997 in respect of vouched expenses incurred wholly, exclusively and necessarily in the performance of the duties of the employment”.

The revised guidance advises that employers must retain records of all tax-free allowance payments to employees.

In situations where an employee is working from their home but undertakes business travel on a particular day and subsequently claims travel and subsistence expenses, please be aware that if the e-workers daily allowance is also claimed by that employee for the same day, then it will be disallowed and instead, treated as normal pay in the hands of the employee/e-worker i.e. it will be subject to payroll taxes.

Where an employee qualifies as an e-worker, an employer can provide the following equipment for use at home where a benefit-in-kind (BIK) charge will not arise provided any private use is incidental:

• Computer, laptop, hand-held computer
• printer
• scanner
• software to facilitate working from home

There is no additional USC liability imposed on the provision of this work-related equipment to an employee.

Please be aware, however, that laptops, computers, office equipment and office furniture purchased by an employee are not allowable deductions under s. 114 of the Taxes Consolidation Act (TCA) 1997.

e-Working expenses can be claimed by completing an Income Tax return.  An individual can complete this form on the Revenue website as follows:

• sign into myAccount
• click on ‘Review your tax’ link in PAYE Services
• select the Income Tax return for the relevant tax year
• click ‘Your Job’
• in the ‘Claim for Tax Credits, allowances and Reliefs’ page select ‘Remote Working (e-Working) Expenses’ and insert the full amount of the expense in the “Amount” section.

As a claim may be selected for future examination, all documentation relating to a claim should be retained for a period of six years from the end of the tax year to which the claim relates.

Finally, for employees who meet the relevant conditions and are deemed qualify as e-workers:

• Using part of his/her home for the purposes of e-working will not affect his/her entitlement to principal private residence (PPR) relief when selling his/her home in the future.
• There is no reduction in the Local Property Tax (LPT) where part of the property is used for the purposes of e-working.

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/ebrief/2020/no-0452020.aspx

If you are facing retirement or redundancy, it is important to understand the tax treatment of your severance package. The following attract beneficial tax treatment:

1. Statutory redundancy payments
2. Ex-gratia Termination payments
3. Pension lump sums

Statutory redundancy payments

Statutory redundancy payments are tax exempt.  They are based on two weeks’ pay for every year of service plus one additional week’s pay with maximum weekly earnings capped at €600 per week.  Income in excess of €31,200 is ignored when calculating Statutory redundancy payments.

Ex-gratia termination payment

Lump sum payments paid by an employer on retirement or redundancy may be taxable.

All or part of the ex gratia termination payment may qualify for tax relief.

The termination payment tax reliefs are not available, however, to any payments made to an employee under the terms of their employment contract. In other words, any contractual payments made by the company to its employee are treated in the same way as a salary payment.

Only complete years are counted for purposes of the reliefs i.e. part of a year cannot be taken into account for the purposes of the calculation.

There are three types of tax reliefs available:

1. Basic Exemption – This exemption is calculated as €10,160 plus €765 for each complete year of service.

2. Increased Basic Exemption – The Basic exemption may be increased by a further €10,000 less the current actuarial value of any tax free pension lump sum receivable now or in the future from the company/occupational pension scheme. This relief is available provided the employee hasn’t claimed an exemption in excess of the Basic Exemption within the previous ten years.

3. Standard Capital Superannuation Benefit (SCSB) relief – This Relief is based on the employees’ average annual remuneration for the last 36 months up to the date of termination.

The tax free amount is calculated as follows:

(A × B) − C

15

where

A = the average remuneration for the last 36 months of service up to the date of termination.  The value of any taxable benefits can be included in the figure for emoluments.

B = The number of complete years of service.

C = Any tax free lump sum received or receivable under the employer/occupational pension scheme.

There is a lifetime cap of €200,000 on the tax-free amount of a termination payment an employee is entitled to receive.

The amount of the termination payment in excess of the relevant exemption/relief is liable to Income Tax and Universal Social Charge at the employee’s marginal rates.

There is no employee and employer’s PRSI payable on a termination payment.

Before making any decision, please keep in mind that claiming either (i) the Increased Basic Exemption or (ii) the SCSB Relief can affect an employee’s ability to receive a tax-free lump sum from their employer pension scheme on retirement.

Pension Lump Sums

When you retire, you can opt to take a tax-free retirement lump sum which is capped at €200,000 under current legislation.

The amount between €200,001 and €500,000 is taxable at the standard rate of tax being 20%

Any amount over €500,000 is taxed under the Pay As You Earn system at the taxpayer’s marginal tax rate of 40%.

For further information on Termination Payments, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-05-19.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

It’s very difficult to keep up to date with all the amendments to the Irish tax system so here is a summary of some of the changes to be mindful of in 2018:

1. Annual Membership Fees paid to a professional body (Revenue eBrief 04/18 published on 9^th January 2018)

 https://www.revenue.ie/en/tax-professionals/ebrief/2018/no-0042018.aspx

The updated Revenue guidance notes allow an employee to claim a deduction for professional membership fees only in circumstances where:

1. There is a statutory requirement for that employee to be a member of a specific professional organisation or body or to hold a practicing certificate in order to carry out the duties of his/her employment or
2. In the absence of that professional membership or practicing certificate the individual cannot legally fulfill the full duties of his/her employment.

Where the employer pays the membership fee on the employee’s behalf and either of the above two conditions apply then no Benefit-in-Kind is deemed to have arisen.  Subsequently no payroll taxes will arise.

We would advise all employers to ensure the payment of professional membership fees on behalf of employees can be supported in the event of a Revenue Audit.

2. Increase in Employer’s Pay Related Social Insurance from 10.75% to 10.85% from 1^st January 2018.

 3. Benefit-in-Kind Exemption of Electric Vehicles for 2018. 

Finance Act 2017 introduced this exemption for electric vehicles which were available for private use for employees during the 2018 tax year.  It is not clear whether or not this scheme will be extended into 2019 which may result in a low uptake in purchasing electric vehicles by employers.

The exemption applies to cars and vans deriving their power from an electric motor.

It does not apply to hybrid vehicles.

4. PAYE Modernisation or Real Time Reporting

From 1^st January 2019 all employers will be required to accurately provide PAYE data to Revenue on a Real Time basis.

This effectively means:

• Revenue will be able to automatically review employees’ payroll information and immediately identify any discrepancies and errors.
• The PAYE information submitted to Revenue must be 100% correct.  In other words, the opportunity to amend errors at the end of the year has been elimited.

For further information, please follow the link:

https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-892017.aspx

We would advise all employers to take the time, sooner rather than later, to ensure their payroll processes will be adequate to handle the increased obligations of the Real Time Reporting.

 Here is a list of other relevant Revenue eBriefs:

Home Carer Tax Credit – Revenue eBrief No. 009/18 (29 January 2018) https://www.revenue.ie/en/tax-professionals/ebrief/2018/no-0092018.aspx

Change in Basis of Assessment – Schedule E – Revenue eBrief No. 127/17 (29 December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1272017.aspx

Taxation of payments to craft apprentices by Education and Training Boards –Revenue eBrief No. 126/17 (29 December 2017)

Benefit-in-Kind on use of Company Vans – Revenue eBrief No. 124/17 (28^th December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1242017.aspx

Exemption from Income Tax in respect of certain payments made under employment law – Revenue eBrief No. 118/17 (20 December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1182017.aspx

PAYE Services: Tax and Duty Manual Updates – Revenue eBrief No. 111/17 (01 December 2017) https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-1112017.aspx

Amendments to the Employment and Investment Incentive on 2^nd November 2017 – Revenue eBrief No. 99/17 (02 November 2017)
 https://www.revenue.ie/en/tax-professionals/ebrief/2017/no-992017.aspx