Revenue is giving employers an extra three months to pay the 2020 tax bills of workers whose jobs were supported via the Temporary Wage Subsidy Scheme (TWSS).
Companies will now have until the end of September to cover the PAYE and USC costs of workers who were assessed for tax earlier this year on subsidised wages they earned in 2020.
About 420,000 people got hit with tax bills in January because they underpaid tax on TWSS and/or Pandemic Unemployment Payments (PUP) last year, as those payments were not taxed at source.
However, employers have the option – as the beneficiaries of the subsidies – to cover those tax bills without having a benefit-in-kind tax apply to their employees.
The original deadline was for the end of June, but Revenue has extended it one more quarter to allow businesses that owe TWSS repayments of their own to have the “fullest information” before covering employee tax liabilities.
The 66,500 companies that used TWSS to help pay workers last year have been engaged in a reconciliation process with the Revenue to balance and over or underpayments of the subsidy. A little more than half of the employers were overpaid and must refund the money to Revenue.
“We really welcome this extension and believe that employers will also welcome it,” said Marian Ryan, consumer tax manager at Taxback.
“We have come across many employers that want to help cover the liabilities for their employees, but immediate cashflow is an issue. Employers are conscious that while they were the ones to reap the benefit of the TWSS, some employees are now actually facing the tax bills as a result.”
Revenue has sent “reconciliation reminder” letters this week to the 27,000 firms that received TWSS overpayments last year and have not yet returned the money.
Accounts must be settled by June 30. Companies that pay on time can avail of the Revenue’s debt warehousing scheme, which offers one year of interest-free tax deferment and three years at low interest before the money must be repaid.
So far 20,000 companies have accepted Revenue’s calculations for reconciliation payments.
As of March 22, 90pc of the 66,500 companies that received a total of €2.9bn TWSS payments had filed returns. Slightly more than half wound up owing a combined €224m to the Revenue, while 3pc were owed €1.4m. A further 41pc had no balance payable.
About 7,000 companies that haven’t engaged fully with Revenue may have to pay back all their subsidies.
Revenue is threatening a cascade of financial consequences for firms that fail to comply, including backdated interest payments on the outstanding amount, withholding of tax clearance and exclusion from other Covid support schemes.