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On 23 June 2020, Revenue released eBrief No. 117/20 which provides for a range of updates and clarifications in respect of the extension of the Temporary Wage Subsidy Scheme (“TWSS”) to 31 August 2020 (as announced by the Minister for Finance and Public Expenditure and Reform on 5 June 2020).

A summary of main points to note in the eBrief are set out below (the full eBrief can be found here).

Extension period and eligibility criteria

Revenue has confirmed that the eligibility criteria to avail of the TWSS throughout the extended period remain unchanged.

By recap, to be considered an eligible employer for the TWSS, the employer must be able to demonstrate that their business has suffered significant negative economic impact as a result of the Covid-19 pandemic such that they are unable to meet normal wages and outputs. In the eBrief, Revenue reiterate the requirement for a minimum of a 25% reduction in turnover, customer orders or any other ‘reasonable basis’ for the three months to 30 June 2020 (Quarter 2 2020) in order to be eligible for the scheme. 

Calculation of available subsidy per employee

Revenue has confirmed that, as expected, the basis for calculating the subsidy amount for the extended period remains unchanged. Employers should continue to use the rates applicable to the Operational Phase, which commenced on 4 May 2020.

Eligibility based on “best estimates” and exiting the scheme

The majority of businesses availing of the TWSS entered the scheme in March and April and were required to make their best estimate when determining if they met the eligibility criteria. While eligibility may have been clear for certain businesses who effectively closed overnight and were unable to trade due to public health restrictions, for others, for example operating at reduced capacity, it was harder to gauge with certainty that the eligibility criteria would ultimately be met.

As we now reach the end of Quarter 2, it is important that all employers availing of the scheme review and assess actual performance to determine whether the eligibility criteria have been met. In cases where the criteria have not been met, Revenue advise that such employers should immediately cease claiming the subsidy.

Employers who consider that they no longer meet the eligibility criteria or no longer wish to avail of the TWSS should ensure that the relevant employees’ normal PRSI classes (pre-Covid-19) should be used in future submissions (rather than Class J9).

Employers should also notify Revenue via MyEnquiries that they intend to exit the scheme.

Helpfully, Revenue has stated that whilst they will require evidence of the assumptions used to support the original self-assessment of eligibility, once the basis is “reasonable”, they will not seek to claw-back the subsidy paid for earlier periods. If, however, there is not a reasonable basis for the assessment made at the outset, all subsidies claimed to date will be repayable. 

Week 1 Basis

TWSS payments made to employees have not been taxed in real time through the PAYE system. They are, however, subject to PAYE and USC which will be calculated as part of the employee’s End of Year review.

As a result of the cumulative nature of our PAYE system, many employees on a cumulative tax credit certificate have received refunds of tax paid in early 2020 through the April, May and June payroll runs.

In order to reduce the level of additional refunds generated, Revenue has advised that they will place all employees who were in receipt of TWSS payments on a Week 1 basis.

These amendments have already been made available to employers on ROS since 21 June 2020. Employers should ensure they are operating the most recent Revenue Payroll Notification (RPN) when processing future payroll submissions to ensure the Week 1 basis applies. 

Compliance Programme

Revenue has confirmed in this latest statement that they will be performing compliance checks on all employers availing of the scheme in order to confirm that:

  • They meet the eligibility criteria;
  • Employees are receiving the correct amount of subsidy; and
  • The subsidy amount is being correctly recorded in employee payslips.

The compliance check programme will also address any identified issues in respect of the operation of Real Time Reporting by employers over 2019 and 2020 and will also provide an opportunity for employers to address any other outstanding tax issues.

This will be important for employers who wish to avail of the 'debt warehousing' scheme for Employer PAYE and VAT liabilities incurred during the pandemic period. An up to date compliance record will be required in advance of availing of this scheme.

Revenue note that it is expected that this compliance programme will last for several months and letters will issue to employers and their agents via ROS. It is not clear yet when these compliance programmes will commence.

Other updates/commentary from Revenue

Apprentices returning to work

A number of apprentices had been excluded from the TWSS scheme as they were not on the employer’s payroll in February 2020 as a result of attending their education and training programme run by SOLAS.  Revenue has now implemented a change to the TWSS to accommodate these individuals. Further details of how an employer can access the TWSS for these apprentices can be found in the eBrief.

Lessons learned from operation of the scheme to date

In the guidance, Revenue has included some examples of why the J9 payroll submissions haven’t been refunded in some cases.  While there doesn’t appear to be anything new in this, it may provide employers with some practical insights as to why refunds haven’t been received in some cases. Further information can be found in the eBrief. 

Get in touch

For advice on this changing situation, please contact our Employment Tax team.

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