Question: I am resident in Northern Ireland but I am employed in Dublin and commute on a daily basis. My employer deducts PAYE, PRSI and USC from my wages. As I am resident in Northern Ireland, I have to submit a self-assessment income tax return to the HMRC. Can the USC be included as tax when completing a self-assessment tax return to HMRC?
Answer: Yes, USC is considered to be income tax for the purposes of the Double Taxation Agreement between Ireland and the UK. The individual should complete and submit a self-assessment tax return to the HMRC to include any foreign income (e.g. the salary arising from the Irish employment) and claim a credit for the income tax, including USC, paid in Ireland.
This eBrief outlines that Revenue has published a new tax and duty manual which explains the use of and access to taxpayer information. Finance Act 2017 inserted Section 851B into the Taxes Consolidation Act 1997 to provide Revenue with a clear legal basis for processing data which is compatible with the requirements of GDPR which comes into effect on 25th May 2018.
This eBrief confirms that the relevant tax and duty manual has been updated to take account of the increase in the SRCOP to €665 per week (€2,880 per month) which applies under the Emergency Basis of Tax for tax year 2018 and subsequent years.
The countdown to PAYE Modernisation is in full swing with the new real time system set to go live from 1st January 2019, 10 months from now! With P60s for 2017 having been issued to employees and P35s for 2017 having been filed with Revenue, you may be happy to hear that 2018 will be the last year in respect of which you will have to issue P60s and file a P35 return!
For tax year 2019: P30s, P35s, P45s, P46s, and P60s will be abolished.
In 2019, employers will be required to request a Revenue Payroll Notification (RPN) from Revenue before paying employees. An RPN will be the new name for a P2C and will contain the necessary information to deduct tax, USC and LPT from employees. The first request for an RPN for a new employee will also register the employment with Revenue. The use of the Emergency Basis of tax will be limited to those employees for whom an RPN is not available.
Employers will be required to submit payroll information (e.g. pay and statutory deductions, pay date, cessation date, etc.) to Revenue in an Employer Payroll Submission on or before the day the employee is paid.
The employer will receive a monthly statement from Revenue at the end of each calendar month indicating the total liabilities (or refunds) of tax, USC, PRSI and LPT in respect of all the payrolls processed in that calendar month under that employer registration number. If any of the details are incorrect, the employer will be required to correct the statement and submit the corrections to Revenue before the return due date. The statement will automatically become the return on the return due date.
In all cases (i.e. for monthly and quarterly filers) the return due date will be the 14th of the following month. While the return due date is the 14th of the following month, the payment date will be extended to the 23rd of the following month (or 23 days following the end of each quarter) where it is paid and filed online.
Note: Quarterly remitters will be required to submit an employer payroll submission on or before the day the employee is paid, file monthly returns, but the payment will remain on a quarterly basis.
Employers can start to take steps now to ensure that they are ready for PAYE modernisation. One of the most important things for employers to do is to make sure that they have the correct PPS number for each employee and to ensure that each employment is registered with Revenue (i.e. does the employer hold a current P2C for each employee?).
Where the employee is commencing employment for the first time in the State, the onus is on the individual to register his employment online using the Jobs and Pensions service in MyAccount, which will result in a P2C being issued to the employer. Employers should provide such employees with their employer registration number, start date, pay frequency and staff number if applicable.
In Budget 2018, it was announced that a working group would be set up to examine and report on the options for the amalgamation of USC and PRSI. The working group has now been established. It is chaired by the Department of Finance and includes representatives from the Department of the Taoiseach, Public Expenditure & Reform and Employment Affairs and Social Protection.
The terms of reference of the group are to examine and present options for the amalgamation of PRSI and USC in a manner which seeks to address:
1. The need to preserve the tax base having regard to the need for certainty, equity, and ease of compliance and administration,
2. Current and future funding challenges facing the Social Insurance Fund,
3. Issues likely to arise from a phased implementation over a number of years of the new instrument,
4. Simplification of the personal tax and social insurance systems
An employee was employed from 1st June 2007 until 31st December 2017 when her position will be made redundant. She has been absent on certified sick (ordinary illness) leave since 1st April 2017 and will not return to work before 31st December 2017. Prior to this absence, she was absent on certified sick leave from 1st February 2010 to 31st July 2011. How do these absences affect how her reckonable service is calculated for statutory redundancy purposes?
Under the Redundancy Payments Acts 1967 to 2014:
- All absences which occurred prior to the 3 year period ending on the date of termination are fully reckonable for statutory redundancy purposes. Hence the absence on sick leave in 2010 and 2011 is fully reckonable for redundancy purposes.
Any period of absence due to illness in excess of 26 weeks which occurs during the 3 year period ending with the date of termination does not count as reckonable service for redundancy purposes. Hence the first 26 weeks of the absence in 2017 are fully reckonable for statutory redundancy purposes, and the remaining 3 months (93 days) are not reckonable for statutory redundancy purposes.
Extension of Maternity Leave and Benefit for Premature Births
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.
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?
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.
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?
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.
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?
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.
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?
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 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.
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?
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.
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?
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.
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)?
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.
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)?
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.
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?
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.
If an employee wants to donate €250 to a charity, can this be done as a salary sacrifice?
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.
When calculating an employee's taxable emoluments for the purpose of the SCSB computation, what figure do we use? For example, the employee's gross pay is €75,000 but he sacrifices €1,500 per year for a travel pass under the Revenue approved salary sacrifice arrangement and he contributes €7,500 to the company pension scheme.
Taxable emoluments include anything that is assessable to income tax under Schedule E (i.e. the PAYE system) even where it is otherwise relieved from tax by virtue of another provision in the tax legislation. Hence, even though the employee got tax relief on his travel pass and on his pension contribution (i.e. he only paid tax on €66,000), the gross earnings of €75,000 can be used as the figure for taxable emoluments in the SCSB computation.
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).
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?
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.
Department of Finance
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.
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?
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 and collective. 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 to pay, 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.
Taxation of Illness Benefit
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.
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?
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.
PRSI Refund from the Department of Social Protection:
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.
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?
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).
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.
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.
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?
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.
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?
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.
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?
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).