Subsidies received by employers:
The TWSS subsidies received by employers from Revenue are revenue receipts by their nature and accordingly will be treated as a reduction in the wages / salaries related expenditure line item for the accounting period concerned. The subsidies received reduced the expenditure incurred by employers and therefore these subsidies will reduce the amount of wages and salaries allowable as an expense for tax deduction purposes.
Clawback of PAYE from employees :
The Temporary Wage Subsidy Scheme (TWSS) payments by Revenue to employers are treated as part of the employee’s emoluments – ie salary and wages for tax purposes.
The subsidies were not taxed in real-time via the PAYE system however and the amounts received in 2020 by the employees are chargeable to income tax and USC.
The amount of income tax and USC will be reflected on each employee’s preliminary end of year statement for 2020 which is accessible via the PAYE My Account facility for each employee since 15th January 2021.
The employee’s must then complete an income tax return to receive their final statement of liability which will provide the final over or underpayment for the year.
Employees have the option to pay any underpayment in full via My Account or they have the default option of discharging any underpayment arising due to the TWSS subsidies over a four year period commencing in 2022 via a reduction in the annual tax credit entitlement.
As an example – Employee A has a €2,500 income tax underpayment for 2020 This can be discharged as follows;
(1) Employee can make payment of the €2,500 via My Account
(2) Revenue will reduce the employees’ tax credits by €625 for the years 2022 to 2025 thereby recouping the underpayment via the PAYE system
Revenue has confirmed that employers may discharge the income tax liabilities of employees without a benefit in kind charge being levied by Revenue. Employers can pay the employee’s liability in one of two ways;
(a) Payment direct to the employee who then must pay the liability
(b) Amend the final payroll submission for 2020 to include additional income tax paid and USC paid that equals the liability shown on the employee’s end of year statement.
The employer will then need to pay the additional amounts that are notified by Revenue in a revised monthly PAYE statement.