Niall Collins (Limerick County, Fianna Fail)
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202. To ask the Minister for Finance if he will address a matter raised in correspondence by a person (details supplied); and if he will make a statement on the matter. [11483/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Temporary Wage Subsidy Scheme (TWSS) was introduced on 26 March 2020 to provide income support to eligible employees where the employer’s business activities were negatively impacted by the COVID-19 pandemic. This scheme ended on 31 August 2020 and was replaced by the Employer Wage Subsidy Scheme (EWSS) from 1 September 2020.

The transitional phase of TWSS operated until 3 May 2020 and provided a subsidy of 70% of the average net weekly pay up to a maximum of €410 in respect of eligible employees. The operational phase of the scheme was introduced from 4 May 2020 and included increased subsidy rates up to 85%, to a maximum subsidy payment of €410. The operational phase also included a tapering mechanism that ensured the subsidy amount plus any additional payment by the employer did not exceed the employee’s ‘normal’ average weekly wage (ARNWP). The ARNWP for each employee was based on the average wages received over the months of January and February 2020.

Under the TWSS, employers were expected to make best efforts to maintain employees’ net incomes for the duration of the scheme. However, there was no requirement in the scheme for employers to pay an additional gross (top-up) payments. That said, participation in the scheme does not affect an employee’s rights and entitlements.

TWSS payments are treated similarly to normal pay for taxation purposes and as such are subject to income tax and the Universal Social Charge (USC). However, the TWSS along with the Pandemic Unemployment Payment (PUP) were not taxed in the normal real-time manner in 2020 and were instead taxed at year end. This arrangement was put in place to ensure payments were available to employees through the scheme as quickly as possible given the urgency and suddenness of the pandemic.

On 15 January 2021, Revenue made a Preliminary End of Year Statement for 2020 available through its online myAccount facility to all PAYE taxpayers, including those who received TWSS and PUP payments. The statement provides employees with a preliminary calculation of the amount of tax and USC paid for 2020 and indicates whether the year is balanced, overpaid or underpaid, before any additional credits such as health expenses are claimed.

Revenue has advised me that the spouse of the person in question received TWSS payments for the months of March, April and May 2020. The spouse’s employer also ‘topped up’ her earnings by varying amounts during that period. The ‘topped up’ amounts were taxed in real-time while the TWSS payments were taxed at year-end. The person’s spouse also received a small amount in tax and USC refunds through her pay during this period, arising from unused tax credits, as well as payments from the Department of Social Protection during the year, which were untaxed at that point.

The person’s Preliminary End of Year Statementshows a liability of €858.67 for 2020. The underpayment is made up of €716.86 in income tax and €141.81 in USC and for the most part arises because the TWSS payments received by his spouse were not taxed until year end. This liability cannot be finalised until the person completes his 2020 Income Tax return and may be reduced if the couple have additional tax credits to claim. If there is still an outstanding liability after any additional tax credits are allocated, the amount due can be collected, interest free, over four years from 1 January 2022 by reducing their tax credits, thereby minimising any financial hardship to the greatest extent possible.

It is important to understand that the amount of tax and USC due by any employee is based on the gross income received during 2020, comprising of, TWSS, any top-up payment made by the employer, and any PUP payments received. The level of top-up wages (if any) paid by the employer to the employee in addition to the TWSS is a matter between both parties. Revenue’s role is to ensure the correct amount of subsidy is paid to the employer and subsequently passed on to the employee and that the correct amount of tax/USC is deducted from the employee based on the total gross earnings received.

Revenue has confirmed that some employers have agreed to pay, on behalf of its employees, underpayments of tax and USC for 2020 that have arisen due to the non-taxation in real-time of TWSS payments. Revenue has facilitated this arrangement by disapplying the benefit in kind rules, in respect of such payments, on an administrative basis. Further details are available at: www.revenue.ie/en/employing-people/twss/employers/index.aspx, which may be of interest to the Deputy.