PEOPLE on pandemic State supports will be hit by big income tax bills, a representative body for accountants has warned.
Someone receiving the €350-a-week payment under the wage subsidy scheme will have received a total of €7,700 over a 22-week period. No income tax will have been deducted on this.
This is because income tax and USC is not deducted at source on the subsidy payments by employers who have placed people on the Temporary Wage Subsidy Scheme.
This means workers are liable for tax on the income they have received via the way subsidy scheme at the end of the year.
An income tax liability builds up for those getting the Pandemic Unemployment Payment, but USC is not due. The latest figures show that 345,600 people are still getting the PUP payment.
The Consultative Committee of Accountancy Bodies, an umbrella body for accountancy bodies, wants the tax bills on these payments to be spread over four years.
Accountants said the tax liability will not arise until the end of the year rather than paying it on a monthly, fortnightly or weekly basis, as they do with the portion of the earnings that they receive from their employer.
More than 66,500 employers have registered with Revenue for the scheme. Around 550,000 workers are currently on the scheme.
As part of its pre-budget submission, the Consultative Committee of Accountancy Bodies said concessions were urgently needed.
“If an employee receives €350 per week under the TWSS, this amounts to €7,700 over 22 weeks and is a substantial amount of untaxed income for a worker to deal with at the end of the year,” the submission states.
Accountants said clear guidance was needed on how the Government plans to collect tax on the Temporary Wages Subsidies Scheme payments made to more than half a million employees.
This could amount to a substantial tax bill for an employee, the Consultative Committee of Accountancy Bodies warned.
It said it is normal Revenue practice to collect any tax owing in manageable amounts by reducing an employee’s tax credits for a future year or years to minimise any hardship, but specific guidance has not yet issued on exactly how tax due on wage subsidy payments will be collected.
Dr Brian Keegan of Chartered Accountants Ireland said the unpaid tax needs to be spread over four years to “avoid the stress for people having to come up with a lump of money to pay a tax bill in this very difficult year”.
The scheme introduced by the government in March sees the State pay a large proportion of a worker’s wages in companies adversely affected by the Covid-19 crisis.
The government has said the initiative was key to keeping people in a job who are a risk of losing their employment.
Clear guidance is also necessary on how the Government plans to collect tax from individuals claiming the Pandemic Unemployment Payment, which is worth up to €350 a week.
Self-employed workers financially squeezed by the pandemic should get a tax write-off of up to €10,000 as part of broader measures to help more than one million workers in the SME sector, the accountants have suggested.
The Consultative Committee of Accountancy Bodies is made up of the Chartered Accountants Ireland, the Association of Chartered Certified Accountants, the Institute of Certified Public Accountants in Ireland, and the Chartered Institute of Management Accountants.
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