Revenue’s answers to member queries on the TWSS

Jun 15, 2020

Members have contacted us for clarification on several Temporary Wage Subsidy Scheme (TWSS) related issues which we put to Revenue.  The issues relate to the Q2 25% reduced turnover test, employer top-up payments, and clarification on how Revenue plan to collect tax on TWSS payments to employees.  

Question 1: In terms of the qualification criteria for employers to claim the TWSS, members have clients who claimed the TWSS in good faith on the basis that projected turnover for Q2 was down 25% in comparison to Q2 2019, but are now going to fail the Q2 25% reduced turnover test due to unexpected contract wins. The employer will cease the TWSS claim immediately, but what is their position in terms of the TWSS payments received up to the date they won the contract, which pushed the turnover over the Q2 25% reduced turnover test?   

Revenue’s response: It is not intended to reclaim TWSS in circumstances where it was genuinely claimed in the expectation that the projected turnover for Q2 25% test would be met. However, employers will need to provide evidence supporting the initial claim, the date of change in circumstances, and display that claims to TWSS ceased as soon as they became aware they would not qualify. 

Question 2: Are there any plans to allow employers to pay top-up payments exceeding the ARNWP less the subsidy? Employees are unhappy to be getting payments less than their take home pay pre-Covid-19 and this is causing a lot of difficulties for employers who need the full TWSS without triggering a tapering adjustment 

Revenue’s response: There are currently no plans to alter the rules of the scheme. The issue of employees being paid less than their legal entitlement to avoid tapering is an employment law issue rather than a taxation matter.   

Question 3: Can Revenue provide guidance on how it plans to collect tax on the TWSS payments to employees. This could come to a substantial sum if an employer claims the TWSS until the end of the scheme in August. For example, if an employee gets €350 per week for 22 weeks, this will amount to €7,700 in untaxed income for 2020. Revenue have indicated that the employee’s tax position will be reviewed at the end of 2020 and no upfront tax payment will be required from the employee, but the tax due will be collected by reducing tax credits and rate bands in 2021. Clarification on how this tax will be collected would be useful now, along with confirmation that the tax liability will be collected over at least four years so that the employee is not subject to undue hardship, as a result of the employer claiming this subsidy. 

Revenue’s response: Generally speaking, most income is liable to tax, and the amount of tax an individual pays depends on the amount of the income they earn, on their personal circumstances and the tax credits they are entitled to.  TWSS payments are liable to income tax and USC, 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 at the end of the year when Revenue automatically reviews their tax position.  When an end of the year review takes place for a PAYE taxpayer, it may be the case that they have unused tax credits that will cover any tax owing that may arise. Where a PAYE taxpayer owes tax, it is normal Revenue practice to collect any tax owing in manageable amounts by reducing tax credits for a future year or years 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.

Question 4: As a general comment, members say that there is confusion among the public on who the TWSS is intended to support with many employees missing the point that the TWSS is there to support employers. While this message is clear from Revenue guidance aimed at tax professionals i.e. FAQs, could this point be considered in Government communications to the public and information sources aimed at employees. 

Revenue’s response: We will bring this to the next cross Government communication group meeting.

Question 5: An employer qualifies for the TWSS as turnover fell by 25% in Q2. Looking ahead to Q3, turnover will recover so the 25% test will not be fulfilled. However, the employer is still in financial difficulty due to the cumulative impact of the drop in turnover in Q2. Can the employer continue to claim the TWSS in Q3 (July & Aug)? If yes, what information should be in place to support the claim?

Revenue’s response: The eligibility criteria turnover test is remaining the same i.e. a 25% drop between 14 March and 30 June. So quarter 3 turnover is not a measure. However, where cash reserves recover to levels above that required to service debt, we would expect to see a significant contribution toward employees wages as set out in the guidelines on employer eligibility.