March 30, 2020
Failte Ireland raised questions with Revenue regarding the ‘Temporary COVID-19 Wage Subsidy Scheme”. Here are the questions with answers received this morning from Revenue.
Q: By declaring my business as unable to pay wages, am I declaring insolvency?
Latest communication from the Revenue Commissioners states:
“The declaration by the employer when applying for the scheme is not a declaration of insolvency.
The declaration is based on self-assessment principles and is based on reasonable projections. Additionally, Revenue does not consider that any employer will require professional advice or assistance in being able to prove that these criteria are met.”
Revenue considers ‘inability to pay’ as a serious difficulty to pay wages, meet bills or pay outstanding debts and not a declaration of insolvency.
Q. If you currently owe the Revenue Commissioners tax, will they deduct the amount you owe them from the money you will be due to receive on the Temporary COVID-19 Wage Subsidy Scheme?
The Temporary COVID-19 Wage Subsidy Scheme is paid to the employee via the employer. The employer is not entitled to the money in their own right and it cannot be used for any other purpose other than in accordance with the conditions of the scheme, including, for example, meeting any debts of the employer. This includes offsetting tax liabilities.
Q. Are businesses eligible if they do not have an up to date tax clearance form?
The Subsidy Scheme is operated by employers through their payroll system, thereby ensuring employees will be in receipt of the subsidy payment along with any weekly wages paid by their employer. Tax Clearance is not a condition of this scheme.
Q. Why is a list of companies who availed of the scheme being published?
Revenue will publish a list of names and addresses of qualifying employers. This is a standard approach in many types of grant processes. Effectively the register will be available on Revenue.ie after the scheme has finished. In relation to an employee covered by the subsidy, the employer is obliged to show the amount of the subsidy on the employee’s payslip.
Q. Revenue’s FAQs state that Revenue is not assessing eligibility at this stage but may do in the future. The concern here is that in the future, if a business is deemed ineligible, there would be a need to refund the payments.
In operating the scheme, Revenue’s priority is to ensure that all employers experiencing significant negative economic disruption as a result of the COVID-19 crisis can register for and start to receive payment as quickly as possible.
The declaration by the employer as being unable to pay wages, is not a declaration of insolvency. The declaration is simply a declaration which states that, based on reasonable projections, there will be, as a result of disruption to the business caused or to be caused by the COVID-19 pandemic, a decline of at least 25% in the future turnover of, or customer orders for, the business for the duration of the pandemic and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.
Revenue does not consider that any employer will require professional advice or assistance in being able to prove to the satisfaction of Revenue that these criteria are met. Should Revenue seek to validate employer eligibility for the scheme, it will adopt a reasonable, fair and pragmatic approach in considering whether the criteria have been met.
Eligibility will initially be determined largely on the basis of self-assessment and declaration by the employer concerned. This will be combined with a risk-focused follow up verification by Revenue involving an examination of relevant business records where that is considered necessary. Taking above into account, and where an employer has not operated the scheme or followed its guidelines, the legislation empowers Revenue to seek the repayment along with interest and penalties.
Q. The guidelines state that an “employer with a significant cash balance that is not required to meet debt is eligible for the scheme but will be expected to pay proportion of the employee’s salary”. Can we have clarity on this guidance?
The Temporary COVID-19 Wage Subsidy Scheme is predicated on the employer wanting to keep the employees on the payroll and to retain them until business picks up. The employer is expected to make best efforts to maintain as close to 100% of normal income for the employee as possible for the duration of the subsidy period. There is no minimum amount that the employer must pay in order to be eligible for the scheme, but the employer will need to enter at least €0.01 in Gross Pay whenrunning its payroll.
However, an employer that has been hit by a significant decline in business but has strong cash reserves, that are not required to fund debt, while still qualifying for the scheme is expected by Government to pay a significant proportion of the employees’ wages.
Sometimes referred to as top-up payments, in the transition phase (26th March to no later than 20th April) an employer can choose to make an additional payment to the employee to fully or partially make up the difference between the amount provided by the subsidy scheme and the employee’s normal Average Net Weekly Pay. Such additional payments are liable to Income Tax and USC. If the employer makes an additional payment greater than the difference allowed by the scheme (i.e. the employee receives more than the Average Net Weekly Pay) then the subsidy value refundable to the employer will be reduced by this excess amount when the refund reconciliation is performed by Revenue in due course. Further guidance will be published when it’s available.
Q. In order to qualify for payment you must prove that you were employed on 28th February. What about tour guides and wider seasonal staff for hotels and attractions that were due to start in March and have worked in these roles year-on-year?
An eligible employee is someone whose employer cannot afford to fully pay them because of the COVID-19 crisis but is being kept on the books of the employer. The employee must be on the payroll on 29 February 2020 and the employer must, between 1 February 2020 and 15 March 2020, have made payroll submissions for payments to the employee to Revenue with pay dates between 1 February 2020 and 29 February 2020. There is no age restriction for employees to be eligible for the Temporary COVID-19 Wage Subsidy Scheme and it includes those employees on full- time, part-time and short-time work arrangements.
Q. Payment is not available to 66-year olds and over (majority of tour guides and many B+B owners are of that age and payment should be available for all self-employed regardless of age)
See Q&A above. Eligibility for the Department of Employment Affairs and Social Protection (DEASP) COVID-19 Pandemic Unemployment Payment is restricted to those aged between 18 and 66 years old. There is no age restriction for employees to be eligible for the Temporary COVID-19 Wage Subsidy Scheme. The DEASP operated COVID-19 Pandemic Unemployment Payment (CPUP) is available to employees and the self-employed who have lost their job on (or after) March 13 due to the COVID-19 (Coronavirus) pandemic.
Q. If employees are currently on CPUP and now want to go back to their employer, how can they do that?
If an eligible employer has laid off employees as a result of COVID-19, they can take the employees back onto the payroll and will qualify for the subsidy if they meet the criteria, were on payroll at the end of February 2020 and details were returned to Revenue in February’s payroll submissions by 15 March 2020. The employer can create a new employment for the employee under the same PPSN, with a different EmploymentID, and apply the scheme for this employee.
Where an employee who was previously laid off has been re-hired, the employee will qualify for the subsidy scheme if their DEASP Pandemic Unemployment Payment claim is ceased. Revenue will share data with DEASP. If an employee is receiving both the Pandemic Unemployment Payment (CPUP) and the wage subsidy, DEASP will cease their PUP payments.
Q. The taxation of the subsidy on the Revenue website is described as: ‘Income tax, USC, LPT, if applicable, and PRSI are not deducted from the Temporary COVID-19 Wage Subsidy Scheme. However, the Subsidy will be liable to Income Tax and USC on review at the end of the year.’
The subsidy payments are liable to income tax; however, the subsidy is not taxable in real-time through the PAYE system during the period of the subsidy scheme. Instead the employee will be liable for tax on the subsidy amount paid to them by their employer by way of review at the end of the year. When an end of year review takes place, it may be the case that an employee’s unused tax credits will cover any further liability that may arise. Where this is not the case, and should an income tax liability arise, it is normal Revenue practice to collect any tax owed in manageable amounts by reducing an individual’s tax credits for a future year(s) in order to minimise any hardship. Additionally, if an individual has any additional tax credits to claim, for example health expenses, this will also reduce any tax that may be owing.
Q. Short Term Lay Off:
If operating the Temporary COVID-19 Wage Subsidy Scheme the employer may pay additional sums to the employee. These additional sums must be paid through payroll and the wage subsidy plus any additional pay must not exceed the Average Net Weekly Pay of the employee. If the employer makes an additional payment greater than the difference allowed by the scheme (i.e. the employee receives more than the Average Net Weekly Pay) then the subsidy value refundable to the employer will be reduced by this excess amount when the refund reconciliation is performed by Revenue in due course.