Temporary Wage Subsidy
TWS – Tax Credits
Background – The Temporary Wage Subsidy (TWS) Scheme can give rise to 2 separate tax liabilities for employees:
- As you know, the temporary wage subsidy (TWS) payment is not subject to payroll deductions; but is taxable by review directly on the employee after the year end. All other things being equal therefore, the employee will have a tax liability on this payment after the year end.
- In addition, because the TWS payment is not subject to payroll deductions, the employee’s
“taxable gross” salary for April – June 2020 will be much less than usual. Probably, their normal tax credits will be more than sufficient to cover their reduced “taxable gross” for these months. This will give rise to a further tax refund during these months. However, after the year end, some/all of this refund will also have to be paid to Revenue.
Revenue accept that these liabilities will give rise to hardship after the year end but insist that the tax will still be payable. Probably, any tax liability due after the year end will be paid by restricting the employee’s tax credits for 2021 and subsequent years.
Amending Tax Credits for 2020
Assuming the employee can afford it in the current time, an alternative for them is to change their tax credits to a “week 1/month 1” basis. Any tax refunds due to them as outlined in 2. above would therefore not be paid, giving rise to a reduced tax liability after the year end.
If they wish to change their tax credits on this basis, they will need to make a “MyEnquiries” submission (through their “MyAccount”). They should quote their PPSN and their employers tax number and state that they want to effect the change immediately.
Within the drop-down menus, I suggest they select “PAYE employee – Credits/reliefs” and “ Credits/reliefs not listed above”.
The employer cannot effect this change; it must be done by the individual employee personally.
The employee should do so as soon as possible to maximise the chances of the change being effected before the next payroll run.
If the employee changes their tax credits back to a cumulative basis before the year end, this will trigger an immediate tax refund (which will again be repayable to Revenue after the year end).
As you will appreciate, changes are constantly happening as regards the TWS. The above is based on all the available information we have to hand at the moment. If circumstances change, we will certainly let you know.