25th February 2021
While the Temporary Wage Subsidy Scheme (TWSS) finished in terms of payments to employees on 31 August 2020, there are a number of matters associated with the scheme that will have to be dealt with in the coming months.
Employers who availed of the TWSS are obliged to report to Revenue the actual subsidy that they paid to employees on each pay date so as to determine:
If an employer either needs to repay to Revenue any subsidy amounts they received or if they are entitled to any additional subsidy payment on the basis they did not receive the full amount initially due to them.
The amount of the TWSS subsidy paid to each employee. This will be used to calculate the amount of income tax and USC that the employee owes on the TWSS amounts they received in 2020.
Work is currently underway by Revenue on developing the TWSS Reconciliation CSV Files. These files are expected to be made available to employers from the third week of March, and employers will be given time to check and correct the data, with the process expected to be open until the end of June.
Employers paying employees’ 2020 tax liabilities on TWSS payments received
Revenue will facilitate employers who wish to pay their employees’ 2020 TWSS related tax liabilities. Where an employer pays his employees’ TWSS related tax liabilities, such payments will not be treated as a BIK for the employees. However, the employer will not be entitled to deduct this cost as a deductible expense in computing their profits for tax purposes. This will make this facility unattractive for non-incorporated businesses. Employers using this facility must agree with the employees concerned about the method by which the employees’ TWSS related tax liabilities are to be paid. The way to pay these tax liabilities are:
Pay to each employee the amount of income tax and USC due on the TWSS payments they received, as shown on the Preliminary End of Year Statement that Revenue has issued for 2020, or
The employer amends their last payroll submission for 2020 to add the additional income tax and USC liabilities as shown on the Preliminary End of Year Statement on an employee-by-employee basis.
This facility for employers to pay employees’ TWSS tax liabilities on a BIK-free basis lasts until 30 June 2021. There are still some queries as to how this will operate in practice. These queries primarily relate to quantifying the amount of tax related to the TWSS, particularly in self-assessed cases and, for example, in cases of jointly assessed couples. We understand that further guidance on the employer facility covering these matters will be made available by the end of March.
In the coming days, Revenue will be contacting 3,000+ employers to remind them that they must provide the correct subsidy paid data in advance of the TWSS reconciliation. The letters are issuing in hard copy form to employers and their PREM agents (where there is a PREM agent on record) and are expected to be delivered from 23 February.
It is essential that employers who availed of the TWSS respond to all requests from Revenue for additional information or the filing of TWSS reconciliations. Failure to respond on a timely basis could result in a clawback of TWSS payments and the charging of interest/penalties by Revenue.
Employment Wage Subsidy Scheme (EWSS)
The EWSS was due to cease on 31 March 2021. However, with the extending of the Level 5 Covid 19 lockdown to at least 5 April and potentially to “mid-summer”, the EWSS is being extended to 30 June 2021.
Eddie Coleman, Tax Compliance Partner, HLB Sheehan Quinn:
"The extension of the EWSS and other support measures for businesses to 30th June is to be welcomed. The facility for employers to pay their employees’ TWSS related tax liabilities on a BIK-free basis is positive. However, by treating the payments as non-deductible in computing taxable profits it makes it very unattractive for self-employed individuals and partnerships as compared to corporate employers."
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