Revenue have issued eBrief No. 05/12 which clarifies that certain payments made by the Department of Social Protection, other Government Departments and agencies such as FĀS and the Department of Education and Skills are not liable to the USC. The eBrief confirms those making such payments should not deduct USC or record these payments for USC purposes on forms P45, P60 and P35. Where Income Tax applies they should be recorded as normal.
As reported in Chartered Accountants Tax News, since 1 January 2012, the basis of deduction for the USC changed from week one/month one to the cumulative basis. This brought the USC system into line with the way in which the PAYE system operates in respect of Income Tax. The version of the Tax Credit Certificate (P2C) that Revenue issues to employers/pension providers for Income Tax purposes also contains information on rates and thresholds for USC purposes
However, the rates/thresholds for USC purposes are not relevant in relation to social welfare type payments which are not chargeable to USC. Those making such payments (employers, Departments, agencies, etc.) should not deduct USC when they are making these payments. Nor should these payments be recorded for USC purposes on forms P45, P60 and P35.
Any non-exempt payments should be treated as normal and recorded on the relevant forms.
A full list of social welfare type payments not subject to the USC is available in Appendix A of the USC FAQ document and also from a link within Revenue eBrief No. 05/12 available here.