John Lahart (Dublin South West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

217. To ask the Minister for Finance if his attention has been drawn to an anomaly (details supplied) that may exist in the Finance Bill 2020; and if he will make a statement on the matter. [43531/20]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Payments made under the Pandemic Unemployment Payment (PUP) are income supports and share the characteristics of income. The PUP follows the general taxation rule for social welfare type payments and, thus, is chargeable to income tax, but exempt from the USC and PRSI charges. This will be the case whether, prior to receipt of the PUP, the recipient was a PAYE worker or a self-employed individual.

The formal taxation arrangements for the PUP are being legislated for in Finance Bill 2020 and the legislation reflects the standard approach to taxation of social welfare benefits, including jobseekers benefit for the self-employed, which is to tax the benefits on an actual basis under Schedule E. In the absence of these changes, the payments would be taxable under Case IV of Schedule D, which would also be on an actual basis.

Being taxed on an actual basis means that for each tax year, recipients of the PUP are taxed on the payments that are actually received in the corresponding calendar year. This is the case regardless of the period for which a self-employed individual carrying on a trade or profession prepares his or her accounts for that trade or profession.

Revenue advise that self-employed individuals would be covered under the debt warehousing facility.

Self-assessed individuals, i.e. chargeable persons, who have income from non-PAYE sources are obliged to file a tax return and account for all their income including the PUP in their tax return. This is the case whether or not such individuals were in receipt of the PUP.

The 2020 tax return would be due to be filed by 31st October 2021, and any balance of tax owing would normally be due to be paid at the same time.

However, there is also a provision in the Finance Bill which expands the debt warehousing scheme to include taxpayers who self-assess for income tax. The scheme is available to any self-assessed taxpayer who expects that her/his income for 2020 will be more than 25% lower than her/his income for 2019 and as a result s/he is unable to pay the balance of income tax for 2019 and Preliminary Tax 2020.

Where a taxpayer is eligible for warehousing, collection of these liabilities may be suspended for a period of 12 months from 31 October / 10 December, as appropriate. Warehoused liabilities will be subject to no interest for this 12 month period and a reduced interest rate of c. 3% per annum thereafter until paid in full.

If income for 2021 is also more than 25% lower than income for 2019, the balance of 2020 Income Tax and Preliminary Tax for 2021 may be warehoused.