Tuesday, 21 February 2012
Department of Finance
I assume the Deputy is referring to the Universal Social Charge (USC) treatment of employer contributions to PRSAs and occupational pension schemes. The position is that the amount contributed by an employer to a PRSA is treated as a benefit-in-kind (BIK) in the income tax system and, therefore, is seen as the employee’s own contribution and is subject to the USC in the same way as any other income of an employee. In contrast, an employer’s contribution to a non-PRSA occupational pension scheme is not treated as the employee’s own contribution and is therefore not taxed as a BIK.
The different tax treatment of employer contributions to occupational pensions and PRSAs has been in existence since the introduction of the PRSAs. The tax treatment of PRSAs is an integral part of the PRSA and was devised as part of the design of PRSAs. Exempting employers’ contributions to PRSAs from the USC may provide an opportunity for tax avoidance where, by agreement between employer and employee, the employer makes the majority or all of the contribution to ensure that the employee would avoid the charge of the USC.
I should point out this particular issue was included in the recent review of the USC. This review was published on my Department’s website in January of this year. In view of the foregoing and taking everything into consideration, I have decided not to make any changes to the treatment of PRSAs in respect of the USC at this time. However, as with all taxes I will keep the matter under review.