What’s happening with the taxation of Maternity Leave?
The taxation of Maternity Leave, Adoptive Leave and H&S Benefit was announced in Budget 2013 and it was proposed by Revenue that similar to the taxation of Illness Benefit, employers would be responsible for the identification, taxation and submission of PAYE on these payments to new and expectant mums from 1st July 2013.
How did Revenue propose to collect the tax?
It was originally proposed that employers would be obliged to identify, calculate and submit the PAYE payable on the benefits, similar to what they do with Illness & Disability Benefit currently. However, due to the nature of the benefit, it put the liability on the employers who could potentially have been out of pocket if the employee did have enough tax credit to cover the liability or if they did not return to work. It simply wasn’t practical placing a particularly heavy burden on SME’s!
So what’s changed now?
Following lengthy discussions by various payroll professionals and groups, Revenue have accepted that the proposed method of taxing these benefits by employers were not practical.
The Revenue Commissioners confirmed yesterday (24th April 2013) that the taxation of Maternity Leave, Adoptive Leave and Health & Safety Leave will be operated through an adjustment to the recipients Tax Credits and Standard Rate Cut Off Point (SRCOP).
Employers will receive amended P2C’s to use from 1st July when processing the payroll making for a smoother and more practical solution of this additional payroll task.
How will that work?
“As part of the ongoing exchange of information arrangements between DSP and Revenue, Revenue will receive the payment details which will be updated onto Revenue’s records.
Individuals who pay their tax through the PAYE system will have their annual tax credits and cut-off point reduced by the amount of these payments. Employers/pension providers will be advised of the adjusted tax credits and cut-off points on employer tax credit certificates (P2Cs).
An eBrief will issue to this effect in the next few days. An Employer Notice will also issue as soon as possible.”
– Revenue statement to the Irish Payroll Association yesterday, 24th April 2013.
So what will this mean for employers when calculating the payroll?
The treatment of Maternity and Adoptive Leave have been a topic of debate for many employers and require additional calculation and consideration within the payroll. While there is no obligation to do so, some companies choose to pay employees who are out on leave, others don’t. For the companies who make the payment, the payment from the Department may be directed to the employee or to the employer. Such issues need to be considered for the purposes of Revenue compliance so its important that the person responsible for processing such payments is aware of the implications of the options available to staff within their business.
How do employers keep on top of all these changes while trying to focus on running their business?
Paycheck Plus works alongside companies to ensure their payroll is operating efficiently, compliantly and transparently. Their tailored payroll services are structured to suit the needs of your specific business requirements. Their IPASS accredited and experienced payroll team work with companies to structure their payments to employees in the most tax efficient way for both employer and employee.