Change in tax treatment of illness benefit

Nov 20, 2017

From 1 January 2018, the taxable element of Illness or Occupational Injury Benefit will be incorporated into employees’ tax credit certificates.   This change in treatment is brought about under the PAYE Modernisation Programme and the introduction of the General Data Protection Regulation (GDPR). 

The current practice whereby employers include taxable illness benefit and occupational injury benefit payments with the employee’s taxable pay will cease.  Instead the employee’s available tax credits and rate bands will be reduced and this is similar to the current treatment of maternity benefit payments.  Revenue has confirmed this in eBrief No. 103/17

At a recent meeting of the PAYE Modernisation stakeholder committee, a representative from the Department of Employment Affairs and Social Protection (DSEAP) advised that they will cease issuing illness and occupational injury benefit notifications to employers.   Under GDPR, the DSEAP will not provide any details to employers of such payments or related information about the employee.   In certain cases, depending on the employer’s illness policy, the employer will have to confirm the details of the illness or occupational injury benefit payment directly with the employee.  This may call for changes in payroll procedures. 

We also understand from discussion at the PAYE Modernisation stakeholder committee meeting that from April 2018, the claim form will be separate to the usual medical certificate, and will be provided directly to the DSEAP. 

Read more on PAYE Modernisation on the Revenue website.

You may find helpful information on GDPR from the Data Protection Commissioner website.