News

Library of Knowledge No. 13

Last Sunday 5^th April ’20 revenue confirmed the tax treatment of the COVID-19 Wages Subsidy Scheme to employees.  See below.

Is the wage subsidy taxable on the employee?

Extract from Revenue website 10/04/2020 (issued 05/04/2020)

‘The payments are liable to income tax; however, the subsidy is not taxable in real-time through the PAYE system during the period of the Subsidy scheme. Instead the employee will be liable for tax on the subsidy amount paid to them by their employer by way of review at the end of the year. When an end of the year review takes place, it may be the case that an employee’s unused tax credits will cover any further liability that may arise’

‘Where this is not the case, and should an Income Tax liability arise, it is normal Revenue practice to collect any tax owing in manageable amounts by reducing an individual’s tax credits for a future year(s) in order to minimize any hardship. Additionally, if an individual has any additional tax credits to claim, for example health expenses, this will also reduce any tax that may be owing’

Our advice to clients employees.

At this point it is not possible to calculate tax liabilities due to this scheme as it will be based on :

• Total earnings in 2020
• Total Tax Credits and cut available and if they have been utilised
• Social Welfare income
• Other taxable income
• Medical expenses claimable in 2020
• Other claimable tax credits

Note: If part of a married couple – it may be beneficial that the review is combined to ensure all tax credits and cut offs are fully utilised.

For our clients we would suggest that you circulate this issue to employees to ensure that they are informed.

Stay safe and have a lovely Easter.