COVID-19: Temporary COVID-19 Wage Subsidy Scheme
On March 24th the Government announced that they were replacing the short lived COVID-19 Employer Refund Scheme, which was run by the Department of Employment Affairs and Social Protection, with the Temporary COVID-19 Wage Subsidy Scheme (TWSS), which will be run by the Revenue Commissioners.
The new scheme aims to facilitate employers to pay their employees during the current pandemic, and they will be refunded up to 70% of an employee's wages. The Government expect the employer to try to maintain an employee’s income as close to 100% as possible for the subsidised period.
The Revenue Commissioners note TWSS “provides a maximum of €410 in respect of eligible employees for employers who operate the Subsidy Scheme regardless of whether the employer makes an additional payment to the employee’s earnings or not.”
They go on to say that “In Phase 2, by no later than 20 April 2020, the operation of the scheme will ensure that the Subsidy paid to employers will be based on each individual employee’s Average Net Weekly Pay, subject to the maximum weekly tax-free amounts. Further information on how these arrangements will work will issue shortly” (FAQ 1.2)
The Revenue Commissioners note that income tax and USC will not be applied to the subsidy payment through the payroll; and that employee PRSI will not apply to the subsidy or any top up payment by the employer. Employers PRSI will also not apply to the subsidy and will be reduced from 10.5% to 0.5% on the top up payment.
However, Revenue go on to say that “The 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 the 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 owing in manageable amounts by reducing an individual’s tax credits for a future year(s) in order to minimise any hardship.” (FAQ 3.11)
This quote is taken from the Revenue Commissioners Frequently Asked Questions (FAQ V2.0) document which is available at https://www.revenue.ie/en/employing-people/documents/pmod-topics/guidance-on-operation-of-temporary-covid-wage-subsidy-scheme.pdf
To qualify for the scheme, applying employers must satisfy the Revenue Commissioners that they are:
- Experiencing significant negative economic disruption due to COVID-19;
- Able to demonstrate a minimum of a 25% decline in turnover;
- Unable to pay normal wages and normal outgoings fully; and
- Retaining their employees on the payroll, who must have been on the payroll on February 29th, 2020, and for whom a payroll submission was made to the Revenue Commissioners in the period from February 1st, 2020 to March 15th, 2020.
Employers already registered with the Revenue Commissioners for the first scheme, the DEASP’s Employer COVID-19 Refund Scheme, are not required to take any further action. Employers registering for the new scheme, the Temporary COVID-19 Wage Subsidy Scheme, should apply to Revenue by:
- Logging on to ROS myEnquiries, clicking Add A New Enquiry and selecting the category ‘COVID-19: Temporary Wage Subsidy’;
- Reading the “COVID-19: Temporary Wage Subsidy Self-Declaration” and pressing the ‘Submit’ button;
- Ensuring refund bank account details are registered on your Revenue record. These can be checked in ROS and in ‘Manage bank accounts’, ‘Manage EFT’, enter the refund bank account that the refund is to be made to.
- Revenue will issue a confirmation via myEnquiries and the employer can immediately operate the scheme.
The Revenue Commissioner’s note that employers must not operate this scheme for any employee who has or is making a claim to the Department of Employment Affairs and Social Protection (DEASP) for the COVID-19 Pandemic Unemployment Payment. They also note that for any employee who was not on the Payroll in January or February, 2020, for example they may have been on reduced pay or off-pay leave, “the employee may decide not to participate in the Temporary Wage Subsidy Scheme and instead apply directly to the Department of Employment Affairs and Social Protection for the Pandemic Unemployment Payment”. (FAQ 4.6)
Further information on the Temporary COVID-19 Wage Subsidy Scheme is available at https://www.revenue.ie/en/corporate/communications/covid19/temporary-covid-19-wage-subsidy-scheme.aspx