126 Tax treatment of certain benefits payable under Social Welfare Acts

Summary

A charge to tax under Schedule E is imposed in respect of certain Social Welfare payments. Relief in the form of partial exemption is available in respect of unemployment benefit. In addition, any element of disability, unemployment or injury benefit payments which relate to amounts in respect of qualifying children is disregarded.

The payments listed in the Table to the Section are exempt from the charge to income tax from 1 January 2019 (section 6A) and previous years (section 6B). This puts the longstanding Revenue practice on a legislative footing.

Details

Definition

(1) “the Acts” are the Social Welfare Acts.

“the Act of 2005 means the Social Welfare Consolidation Act 2005.”,

The charge to tax

(2)(a) Payments of —

• widow’s (contributory) pension,
• orphan’s (contributory) allowance,
• retirement pension, and
• old age (contributory) pension,

are treated as emoluments to which Chapter 4 of Part 42 applies. As such these payments are chargeable to tax under Schedule E and are within the scope of the PAYE system.

(2A)(a)&(b)(i)(ii) From 1 July 2013 payments of –

• maternity benefit,
• adoptive benefit,
• health and safety benefit,
• paternity benefit, and
• parent’s benefit,

are treated as emoluments to which Chapter 4 of Part 42 applies. As such these payments are chargeable to tax under Schedule E and are within the scope of the PAYE system.

Any payment of an increase for a qualified adult under the State pension contributory, Pre 1953 State Pension Contributory, State Pension Transition or State Pension non-contributory shall be treated for all purposes of the Income Tax Acts as if it arises to and is payable to the beneficiary of the pension i.e. the pensioner who qualifies for the pension in the first instance.

(3)(a)&(b) Payments of —

• illness benefit,
• jobseekers benefit,
• jobseekers benefit (self employed),
• the payments commonly known as the pandemic unemployment payments (PUP)
• injury benefit which is comprised in occupational injuries benefit, and
• pay related benefit,

are treated as profits or gains from an employment and, accordingly, are chargeable to tax under Schedule E. The tax chargeable is computed in accordance with the Schedule E basis of assessment (see section 112(1)), and except in the case of amounts payable in respect of jobseeker’s benefit (self-employed) the payments are treated as emoluments within the scope of the PAYE system (see Chapter 4 of Part 42). Excluded from the charge to tax, however, is the amount of any such payment, which is referable to a qualified child (within the meaning of section 2(3)(a) of the Social Welfare (Consolidation) Act, 2005).

(3)(c) Jobseeker’s benefit or jobseeker’s benefit (self-employed) payable in any period after 6 April 1997 to a person in short-time employment is exempt from tax. Short-term employment has the same meaning as in the Social Welfare Acts and, in effect, means a working arrangement where either —

• the number of days systematically worked in a working week is less than the number of days which is normal in a working week in the employment concerned – typically, a 3 days on and 2 days off arrangement, or
• the number of days systematically worked in a period of 4 consecutive weeks is less than the number of days which was normal in the employment before the reduction in the number of days worked, provided that the number of days worked is equal to at least one-half the number of days normally worked – typically, a week-on/week-off or fortnight-on/fortnight-off arrangement.

Exemptions

(4) – (5) The first €13 of the aggregate of the amounts of jobseeker’s benefit or jobseeker’s benefit (self-employed) payable (other than amounts payable in respect of a qualified child within the meaning of section 2(3)(a) of the Social Welfare (Consolidation) Act, 2005) to a person for one or more days of unemployment comprised in an income tax week (that is, one of the successive periods of 7 days, beginning with the first day of an income tax year) is exempt from tax.

Ministerial orders

(6)(a) The taxation of illness benefit, jobseeker’s benefit, jobseeker’s benefit (selfemployed) (other than jobseekers benefit paid to individuals in systematic shorttime work), the payments commonly known as the pandemic unemployment payments (PUP),injury benefit and pay related benefit payments comes into operation on such day or days as may be fixed by the Minister for Finance by order and different days may be fixed for different orders and for different categories of recipients.

(6)(b) Any order (bringing any benefit in whole or in part into charge to tax) which it is proposed to make must be laid before Dáil Éireann and may not be made until Dáil Éireann has approved the draft order.

(6)(A) Any DSP payment made to an individual, listed in the Table paid on or after 1 January 2019, is exempt from the charge to income tax.

(6)(B) Any DSP payment made to an individual prior to 1 January 2019, listed in the Table shall be treated as exempt from the charge to income tax in the year of assessment to which the payment relates.

Relevant Date: Finance Act 2021