Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I move amendment No. 1:

In page 8, line 9, to delete “and” and substitute the following:“(iii) to insert the following after subsection (4):

“(5) Subject to subsection (7), where relevant emoluments are paid on 31 December in a tax year or, if that year is a leap year, on 30 or 31 December in that year (referred to in this section as the ‘relevant date’) to an individual who is paid weekly or fortnightly, the part of aggregate income specified in column (1) of Part 1 or column (1) of Part 2, as appropriate, of the Table to this section shall be increased by—

(a) where the individual is paid weekly, one-fifty second of the amounts referred to in the appropriate column, and

(b) where the individual is paid fortnightly, one-twenty sixth of the

amounts referred to in the appropriate column, but where the relevant emoluments paid on the relevant date is less than the increase provided in paragraph (a) or (b), as appropriate, the increase in the part of the aggregate income shall be limited to the amount of the relevant emoluments.

(6) Where subsection (5) applies in respect of an individual, each amount of aggregate income referred to in subsections (1) and (3) and section 531AM(2) shall be increased by—

(a) where the individual is paid weekly, one-fifty second of the amount, and

(b) where the individual is paid fortnightly, one-twenty sixth of the amount,

but where the amount of the relevant emoluments paid on the relevant date is less than the increase provided in paragraph (a) or (b), as appropriate, the increase shall be limited to the amount of the relevant emoluments.

(7) Subsection (5) shall not apply where the normal day on which relevant emoluments are paid to an individual, who is paid weekly or

fortnightly, during a tax year changes either during that year or the preceding year.”,

and”.

The purpose of these amendments is to address an issue whereby an employee may suffer a fall in net income in his or her last payment of the year in a week-53 or fortnight-27 year. USC rate bands for employees are divided equally across the year, assuming a 52-week and a 26-fortnight year. However, a calendar year consists of 52 weeks and one day, or 52 weeks and two days in a leap year. As a result, once every five or six years for weekly paid employees, the additional day will be a payday, resulting in 53 paydays falling within the calendar year. Similarly, once every ten or 12 years, a fortnight 27 arises for fortnightly-paid employees. As no USC rate bands remain for that year, the full amount of the pay is liable to higher rates of USC, resulting in a lower net income for the employee in that week or fortnight.

The same issue arises for income tax purposes. The regulations provide for an additional set of credits and rate bands to be allowed in a week-53 or fortnight-27 year. This amendment will bring the application of USC into line with that of income tax, ensuring employees do not see a reduction in net pay as a result of the date on which their salary is paid. The amendment also ensures that those who are exempt from USC due to low income do not become liable solely as a consequence of having an additional payday in a year. It similarly provides that those who benefit from the exemption from the higher rate of USC, including those over 70 and medical card holders whose income does not exceed €60,000, will not inadvertently become liable at the full rate of USC as a consequence of the additional payday within the calendar year.

These amendments will come into effect for the current year, which means that individuals affected by this issue or who are due to be paid on 31 December this year will benefit from the changes.

See this speech in context