Revenue Note for Guidance

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Revenue Note for Guidance

985B PAYE Settlement agreements

Summary

This section provides that the Revenue Commissioners may make arrangements with employers whereby the employers will themselves pay to the Revenue Commissioners, the tax payable in respect of benefits provided to employees which are minor and irregular rather than deducting the tax from the earnings of the employees and accounting for it through the normal PAYE system. Where the employer so accounts for the tax, the benefits will not form part of the total income of the employees and they will not be entitled to credit for or repayment of the tax accounted for.

Details

Definitions

(1) “qualifying emoluments” means emoluments other than emoluments in the form of a payment of money, which are—

  1. minor, as regards the amount or type of emolument involved, and
  2. irregular, as to the frequency in which or the times at which, the emoluments are provided.

(2) On application by an employer, the Revenue Commissioners may enter into an agreement with the employee to account directly to them in respect of income tax on qualifying emoluments of one or more employees of the employer which would otherwise have to be accounted for through the normal PAYE system.

Where the employer accounts for the tax under such an agreement—

  • 3(a) the employer shall not be liable to account for tax under the PAYE system,
  • 3(b) qualifying emoluments will not be treated as income of any employee,
  • 3(c) the tax accounted for shall not be treated as deducted under the PAYE system
  • 3(d) an employee will not be treated as having paid any part of the income tax and shall not be entitled to a credit or claim repayment of any part of the tax, and
  • 3(e) qualifying emoluments shall not be included by the employee in the annual return.

(4) & (5) The amount of tax to be accounted for by the employer—

  1. is to be determined by reference to—
    • the aggregate amount of the benefits in the agreement on which income tax is payable,
    • the total number of employees in receipt of the benefits,
    • the number of employees liable to tax at—
      • the standard rate for the tax year to which the agreement relates, and
      • both standard and higher rates for that year, and
    • any other relevant details in relation to the agreement.

    And
  2. is to be comprised of—
    • the amount of tax on the aggregate of taxable benefits, calculated by taking account of the number of employees on the standard rate and those on both the standard and higher rates for the tax year, and
    • a further amount to reflect the tax which would have been payable by the employee had he or she not received a tax-free benefit from the employer.

(6) An application by an employer to enter into a PAYE settlement agreement must be received by the Revenue Commissioners on or before 31 December in the tax year to which the agreement applies.

(7) If the tax due under an agreement is not paid to the Collector-General within 23 days of the end of the tax year to which the agreement applies, the agreement becomes null and void and the remaining provisions of the Chapter (PAYE system) and regulations thereunder shall apply.

(8) Any officer acting under the authority of the Revenue Commissioners may perform or discharge any action authorised by this section.

Relevant Date: Finance Act 2021