985A Application of section 985 to certain perquisites etc.

Summary

This section provides that the provision of certain emoluments (apart from certain awards of shares made before 31 December 2010) are regarded as notional payments to which the PAYE system applies. Such emoluments include perquisites and profits chargeable to tax under section 112, expenses incurred in the provision of benefits which are treated as perquisites (i.e. BIKs), benefits arising from a preferential loan, the benefit of the private use of company cars and vans, and gains realised on or after 1 January 2024 from the exercise, assignment or release of rights chargeable to tax under section 128.

Employers are obliged 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 actual 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 on behalf of the employee 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

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

• (1)(a) prerequisites 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 prerequisite 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 prerequisite to which section 112A or 112AA applies (Health Insurance).
• (1)(b) the benefit of the private use of a car chargeable to tax by virtue of section 121,
• (1)(c) the benefit of the private use of a van chargeable to tax by virtue of section 121A.
• (1)(d) a gain realised from the exercise, the assignment or the release of a right, on or after 1 January 2024, to acquire shares or other assets which is chargeable to tax by virtue of section 128.

Exclusion (this provision applies from 25 March 2004)

(1A) & (1B) This section does not apply to emoluments in the form of shares (including stock) received by employees, on or before 31 December 2010. Such shares being shares in the employer company or in a company which controls the employer company. Before 1 January 2024, employees in receipt of share options accounted for income tax under self-assessment instead of PAYE. All other shares given by employers to employees were and are liable to PAYE.

(2) For the purposes of this Chapter and regulations under it, the employer is treated as having made a “notional payment” (as calculated und 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. In the case of gains realised on or after 1 January 2024 which are chargeable to tax under section 128, the “notional payment” amount is calculated by reference to the provisions of section 128(4).

(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 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, and the employee is obliged to account for income tax on the value of those shares or, in the case of notional payments chargeable to tax under section 128, on the gain realised and calculated as per section 128(4). 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 used to fund the tax liability had been paid by the employer to the employee.

(5) In any case where—

1. an employee receives an emolument covered by 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 the employee under 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 shall be laid before Dáil Éireann and may, without prejudice be cancelled within the next 21 sitting days of Dáil Éireann.

Relevant Date: Finance Act 2025