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Temporary Wage Subsidy Scheme Tax Liability

Over the past couple of weeks thousands of people have received a tax bill due to receiving Temporary Wage Subsidy Scheme and the Pandemic Unemployment Payment in 2020, and it came as a surprise for some.

Despite Revenue having mentioned in their press releases about the potential tax bill for those who were in receipt of Temporary Wage Subsidy Scheme (TWSS) and the Pandemic Unemployment Payment (PUP), a lot of people were not expecting to receive the letters from Revenue last month, informing them of a tax liability owed in some cases. Although some may be actually due a tax refund depending on various circumstances.

For those who are less lucky and are in a liability position, the reason for the tax underpayment, is that payments from both schemes were not taxed at source in real-time like a person’s normal salary. Instead, payments received from these schemes were before the application of tax, and so Revenue are now looking to recoup the tax arising on income received by individuals from TWSS and PUP.

It was decided not to tax the support schemes at source to give more disposable income to individuals during the difficult times of the pandemic. However, after this approach received some serious criticism, the TWSS was replaced with Employment Wage Subsidy Scheme (EWSS). EWSS operates differently, and no additional tax is due by the employees who are in a receipt of this scheme at the end of the year. There was no changes to the tax position of PUP.

The tax position for each employee depends on their personal tax bands and credits. Regardless of how small or big your tax bill is, Revenue have confirmed that this tax liability will not fall due this year. There is no requirement to pay the tax owed straight away in one lump sum (although this option is also available to taxpayers). Instead, Revenue have indicated that any tax owing will be collected in “manageable amounts” by reducing an individual’s tax credits for a future years starting in January 2022, in order to minimise any financial difficulties.

Taxpayers are required to file an income tax return to finalise the tax liability. In order to do so, the majority of PAYE workers will be required to complete a Form 12, which can be done online using Revenue’s myAccount services. In the case of self-employed individuals, and some PAYE workers that are considered chargeable persons, a Form 11 has to be filed instead using Revenue Online Service (ROS). All taxpayers will be required to register for myAccount or ROS online prior to completing these forms.

There are a number of ways to minimise your tax liability when filing a tax return, some of these are listed below.

1. Claiming tax credits and reliefs

There are a number of tax credits which may be available, such as medical expenses, flat rate expenses, tuition fees etc. There is a dedicated section on Revenue’s website setting out the various tax credits and reliefs which may be due to individuals. You can claim these credits on your tax return (Form 12 or Form 11).

More information is available here 

2. Claiming tax refunds due to you for the last four years

If not already done so, you can complete your tax returns for the last four years in order to claim any tax back that could be owed to you. The rebate can occur due to varying circumstances such as a gap in employment, change of employment, change of marital status, unclaimed credits, incorrect taxation of your employment income, emergency tax, maternity leave etc.

3. E-working tax relief

If you were working from home in 2020, and your employer did not make any payments to you to cover the additional costs of working remotely, you may be able to claim tax relief on some of these costs.

You can claim a tax relief on a portion of expenses such as electricity, heating and broadband.

To qualify as an e-worker you must:

  • Have some type of formal agreement with your employer that you are required to work from home 
  • Be required to perform essential duties of employment at home

You can find more information on the Revenue’s website, where an explanation of how to calculate the correct amounts is provided.

More information is available here.   

4. Stay and Spend tax Scheme

You can claim a tax credit of 20% on qualifying expenditure incurred on food and hotel accommodation between 1 October 2020 and 30 April 2021. The scheme was introduced to encourage people to spend money in restaurants and hotels in Ireland, supporting the Irish hospitality sector.

The qualifying expenditure does not include alcohol or take away food. The minimum spend is €25 per transaction. You must submit a copy of your receipt with the claim. The maximum tax credit available under the scheme is €125 per person

More information is available here.  

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