Revenue Note for Guidance

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Revenue Note for Guidance

985A Application of section 985 to certain perquisites etc.

Summary

This section provides for the direct application of PAYE to emoluments in the form of benefits such as perquisites and profits whatever chargeable to tax under section 112, expenses incurred in the provision of benefits which are treated as perquisites (i.e. BIKs), the benefit arising from a preferential loan and the benefit of the private use of company cars and vans.

Employers are to deduct the appropriate income tax in respect of those benefits from cash remuneration being paid to the employee at the same time the benefit is provided. Where the cash remuneration of an employee is insufficient to meet the tax liability, the employer will be responsible for any shortfall in the amount of tax due. Where an employee does not make good the shortfall to the employer by the end of the tax year, the tax borne by the employer will be treated as a taxable benefit of the employee in the following tax year and subject to PAYE in the same way as the original benefit.

Details

Application

(1) The section applies to emoluments in the form of—

  • perquisites and profits whatever chargeable to tax under section 112 including—
    • an expense incurred by an employer in the provision of a benefit for an employee which is treated as a perquisite for the purposes of section 112 by virtue of section 118,
    • the benefit arising from a preferential loan chargeable to tax by virtue of section 122,
    • a perquisite to which section 112A or 112AA applies.
  • the benefit of the private use of a car chargeable to tax by virtue of section 121,
  • the benefit of the private use of a van chargeable to tax by virtue of section 121A.

Exclusion (this provision applies from 25 March 2004)

(1A) Subject to subsection (1B), the section does not apply to emoluments in the form of shares (including stock) received by employees, being shares in the employer company or in a company controlling the employer company. Employees in receipt of shares accounted for income tax under self-assessment instead of PAYE. All other shares given by employers to employees are liable to PAYE.

(1B) The section applies to emoluments in the form of shares (including stock) received by employees, being shares in the employer company or in a company controlling the employer company, where those shares are received on or after 1 January 2011. Emoluments in the form of shares are now dealt with on the same basis as other types of perquisites and benefits-in-kind.

(2) For the purposes of this Chapter and regulations under it the employer is to be treated as having made a “notional payment” (as determined under subsection (3)) in respect of the emoluments to which this section applies.

(3) The “notional payment” is the amount which, on the basis of the best estimate that can reasonably be made, is the amount of income likely to be chargeable to tax under Schedule E in respect of the emolument.

(4) Where by reason of an insufficiency of payments actually made to an employee, the employer is unable to deduct the amount of income tax due, the employer will be liable to remit to the Collector-General the amount of tax that the employer is required but unable to deduct.

(4A) Where an employer pays the BIK tax charge in respect of a benefit provided to an employee (because the employee has insufficient income from which the tax could be deducted) the tax paid is credited to the employee.

(4B) Where an employer makes notional payments to employees in the form of shares, he or she is obliged to account for income tax on the value of those shares. An employer is entitled to withhold sufficient shares to fund that income tax liability where the employee does not otherwise provide the employer with sufficient means to do so. Even though the employee has not actually received the shares, he or she is treated as if the value of the shares had been paid by the employer.

(5) In any case where—

  1. an employee receives an emolument of this section,
  2. the employer is required to remit the tax due in respect of the emolument, and
  3. the employee does not, before the end of the year of assessment, make good the due amount to the employer,

the due amount shall be treated as an emolument of this section and charged to tax in the next following year of assessment.

(6) & (7) The Revenue Commissioners may make regulations to make provision with respect to the deduction, collection and recovery of amounts to be accounted for in respect of notional payments and for applying any specified provisions of existing regulations to deductions from actual payments to amounts to be accounted for in respect of any notional payments. Such regulations may, without prejudice be cancelled within 21 sitting days of Dáil Éireann.

Relevant Date: Finance Act 2021