Many employees of companies were in included in the Temporary Wage Subsidy Scheme (TWSS) in 2020. The TWSS paid was not taxed through the payroll and therefore many employees have a personal tax liability.
The Revenue announced earlier this year that an employer could pay part or all of this liability without it giving rise to a BIK for the employee. The deadline for an employer to make this payment has been extended from end of June 2021 to end of September 2021. The extension is intended to ensure that employers have the fullest information available as the TWSS reconciliation process with Revenue is only concluding at the end of June.
An employer is not required to contribute towards the employee’s TWSS liability. The option is still available for the employee to spread the tax over 4 years commencing in 2022.
Where employers are considering paying the TWSS tax, they need to seek Preliminary End of Year Statement from employees which is available through the MyAccount. However for certain employees this is not straightforward. For employees who are taxed under self-assessment due to having non-employment income the statement may not be available at all. For jointly assessed taxpayers the statement will contain their joint income. In such cases employers and employees will need to calculate and agree the tax liability that relates to TWSS payments.
There are two methods by which employers can pay the TWSS liabilities:
- provide funds to each employee to meet their IT and USC liabilities, as shown in their Preliminary End of Year Statement, though a lesser payment can be made. Each employee must then pay their liability via myAccount, or;
- amend the last payroll submission of 2020 by adding additional 'IT paid' and 'USC paid' values that equal the amount of tax liability being paid on behalf of the employee from the Preliminary End of Year Statement. This must be done for each employee concerned.
Should you be considering making payments on behalf of employees or if you would like more information on this matter, please do reach out to your contact at RSM Ireland or Tax Partner Suzanne O'Neill.