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Tax

Paying back tax on the wage subsidy scheme: Revenue's plans aim to 'minimise any financial hardship'

Money received under the wage subsidy scheme is taxable, but that tax liability won’t come until the end of the year.

WORKERS WHO ARE in receipt of the government’s wage subsidy scheme may owe income tax at the end of the year, but the Minister for Finance has said Revenue’s plans to collect this tax will “minimise any financial hardship to the greatest extent possible”.

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 vital to keep people in a job where otherwise they might not have had one.

Over half a million people have received at least one payment on the temporary wage subsidy scheme and over 65,000 employers have signed up to it.

While workers are liable to pay tax on income received through the scheme, they are not being taxed on it week-to-week or month-to-month.

Instead they’ll be liable for it at the end of the year. The same also applies for those who’ve received the pandemic unemployment payment. 

Minister for Finance Paschal Donohoe has said it’s not possible to give an accurate estimate, right now, of how much someone might owe at the end of the year or if they’ll face a tax bill at all. 

There’s a chance there might not a tax bill because a person’s tax credits may offset any potential underpayment at the end of the year. 

In response to parliamentary questions, the minister said: “The level of tax and USC due by any person at year end in respect of TWSS and PUP payments may be reduced or eliminated by the amount of unused tax credits available. Any liability due may also be further reduced if the person has additional tax credits, for example health expenses, to offset.”

He said Revenue has recently placed all people in receipt of either scheme on a “week one basis” to “preserve” unused tax credits that can be used to offset tax or USC liabilities.

Even if you do owe tax, there won’t be a requirement for you to pay it all back to Revenue immediately.

Donohoe said: “Revenue has also assured me that if any tax and USC liabilities still arise following the allocation of unused credits, it will work with the persons impacted upon to collect the outstanding liabilities over an extended period.

This will be achieved by reducing their tax credits for future years, thereby minimising any financial hardship to the greatest extent possible.

Each person’s tax situation will be different, so any liability they do have at the end of the year will be dependent on a range of factors.

These include a person’s civil status, the available tax credits, the actual amount they receive on the wage subsidy scheme or pandemic unemployment payment, any top-up payments from their employer and other credits such as health expenses.

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