Year End 31 st December. Republic of Ireland Payroll Overview

Transcription

1 Year End 31 st December Republic of Ireland Payroll Overview

2 Agenda Country overview Business culture Glossary of terms and abbreviations Employer obligations Build up to gross pay Gross to net calculation Types of Leave Expenses and benefits Net pay and making payments to employees How to read a payslip Special types of employees/employments Year end Record keeping

3 BUILD UP TO GROSS PAY

4 Pay Definitions

5 Gross Pay For the purposes of calculating pay for income tax purposes, gross pay can be made up of several items, such as, but not limited to: Salary Overtime Wages Sick Pay Holiday Pay Bonus payments Dirty money Danger money Arrears Commission Pension Tea money Fees Christmas boxes Benefits in kind Allowances Non Cash Benefits Any other pay or benefits

6 Notional Pay The value of any non-cash benefit or perquisite must be added to pay for the purposes of calculating PAYE/PRSI and levies must be applied in the normal way The rule for establishing the value of a benefit is to take whichever is the highest value of the: Cash value of the cost to the employer or Value realised by the employee in money s worth Less any amount made good by the employee

7 Net Pay for Tax Purposes Gross pay less ordinary contributions made by an employee to a: Revenue approved superannuation scheme Revenue approved permanent health benefit scheme Personal retirement savings account (PRSA) deducted by the employer Retirement annuity contract (RAC) deducted by the employer And the amount salary sacrificed for a travel pass scheme PRSI will be calculated on this net pay for tax, less any appropriate PRSI free allowance

8 Income Tax Generally, there are two types of benefits that an employee may get in addition to a salary: Benefits-in-kind. These are benefits that an employee receives that cannot be converted into cash but have a cash value e.g. company car Other benefits that can be converted into cash or have a cash value and include vouchers, holidays and payment of an employee s bills

9 Income Tax Nearly all income is liable to tax Under the PAYE system, income tax is charged on all wages, fees, perks, profits or pensions and most types of interest. Tax is payable on earnings of all kinds that result from your employment including for example: Bonuses Overtime Non-cash pay or 'benefit-in-kind' such as the use of company car, tips, Christmas boxes etc.

10 An employee earning more than 1,905 pa pays tax on the value of any benefits and benefits-in-kind Taxation of benefits (other than benefits-in-kind), is made literally on the value of the benefit The rules applying to benefits-in-kind vary Special rules apply to the following : Company car Other motor vehicles Loans Income Tax Provision of living accommodation

11 Income Tax There are some benefits that an employee can receive that are not subject to tax or can be received tax efficiently. These include: Provision of bus/train passes for one month or more Bicycle and safety equipment under the Cycle to Work Scheme Certain share and approved profit sharing schemes Canteen facilities Reimbursement of expenses necessarily incurred in the course of employment Some accommodation provision

12 Cont. Income Tax Lump sum and certain redundancy payments Working clothes Non-cash personal gifts not related to employment Employer's contribution to statutory or revenue approved pension schemes Mobile telephones, computer equipment and home high-speed internet connections where those benefits are provided for business use (where private use is incidental.) Private use of company van which is essentially for the purposes of employee's work and where there is an employer requirement to bring the van home and where other private use is prohibited and the employee spends most of their working time away from the workplace to which they are attached

13 Income Tax Income that may be exempt from tax includes the following: Payments to approved pension schemes Statutory redundancy payments Certain social welfare payments Scholarship income Interest from savings certificates and Savings Bonds and National Instalment Savings Schemes, within limits Certain earnings by artists

14 Cont. Certain payments in respect of disabilities linked with Thalidomide Wins from licensed lotteries Income Tax Certain army pensions and allowances Payments made by the Health Service Executive to foster parents for the care of foster children Some compensation payments under employment law Compensation for personal injury that prevents an individual from maintaining his/herself NOTE: Income arising from the investment of such a payment is also exempt if it is the main source of income. Invalidity pension received as a result of the same injury is not included in assessing main income

15 Income Tax The tax, PRSI and Universal Social Charge to be collected from all benefits-in-kind are deducted by the employer at source Preferential home loans A preferential loan means a loan, made by the employer to an employee and/or spouse or civil partner, on which no interest is payable, or interest is payable at a rate lower than the specified rate An employee in receipt of a preferential loan is charged income tax on the difference between the interest actually paid and the amount which would have been payable at the 'specified' rates of interest for the loans. The specified rates are as follows: The current rates are: Qualifying loan for home (principal residence): 4% Other loans: 13.5%

16 Income Tax Small benefits If an employer provides a benefit with a value not exceeding 250, PAYE and PRSI will not be applied to that benefit Only one such benefit received within a tax year is allowable Where a benefit exceeds 250 in value, the full value of the benefit will be subject to PAYE and PRSI deductions

17 Income Tax Private Use of Company Car The notional pay to which PAYE and PRSI must be applied is determined by reference to the "cash equivalent" of the private use of the company car. The cash equivalent is determined by applying a percentage based on business kilometres to the "Original Market Value" (OMV) of the vehicle supplied (whether the vehicle is owned acquired new or second-hand or leased by the employer) The cash equivalent is then reduced by any amount required to be made good, and actually made good, by the employee directly to the employer in respect of any part of the cost of providing or running the car

18 Income Tax Private Use of Company Car There will not be a charge to tax in respect of a car which is in a car-pool. A car can be treated as being in a car-pool if: the car is made available to, and is actually used by, more than one employee and is not ordinarily used by one employee to the exclusion of the others, and any private use of the car by the employees is merely incidental to business use, and the car is not normally kept overnight at or in the vicinity of the home of any of the employees.

19 Income Tax Private Use of Company Car In the case of chauffeur driven cars two separate charges arise: a benefit-in-kind charge in respect of the provision of the car and a benefit-in-kind charge in respect of the expenses incurred by the employer in the provision of a chauffeur Charge for the chauffeur benefit - The total expense incurred by the employer in the provision of the chauffeur (e.g. chauffeur's salary) is chargeable less any amount made good by the employee

20 PRSI

21 PRSI A PRSI contribution is payable in respect of employees and consists of an employer's and, where due, an employee's contribution of PRSI It may be made up of some or all of the following parts: Social Insurance Health Levy National Training Fund Levy The PRSI class of the individual employee determines the rate at which PRSI is calculated PRSI

22 PRSI Employers pay Pay-Related Social Insurance (PRSI) contributions for all employees aged 16 and over Revenue collects PRSI contributions in most cases through the PAYE income tax system and the self-assessment system for the self-employed PRSI contributions may also be deducted for employees who do not pay income tax under the PAYE system The PRSI is collected (also on a pay related basis) and paid directly to the Department of Social and Family Affairs under a special collection system PRSI

23 PRSI The Personal Public Service Number (PPS No.) is a person's unique reference number for all dealings with the public service Who has a Personal Public Service Number? People who have worked in the Republic of Ireland since 1979 People getting a Social Welfare payment or benefit People in the Drugs Payments Scheme Medical card holders All children are automatically allocated a PPS No. when a claim is made for Child Benefit or when a child is claimed for as a dependant by adult receiving a social welfare payment PRSI

24 PRSI It is vital that you quote the correct PPS No. for each of your employees on your P35L end-of-year return Without the correct PPS number the authorities may not be able to update the employee's social insurance record or process any claim to social welfare benefit This will, almost certainly, lead to many enquiries for the employer

25 USC

26 USC The Universal Social Charge (USC) is a tax on income You pay the USC if your gross income is more than 13,000 per year It does not apply to social welfare or similar payments, and there are certain other exceptions

27 USC - exemptions All Department of Social Protection payments, including Maternity Benefit and State pensions Payments made as part of Community Employment schemes or the Back to Education Allowance Social welfare or similar payments made from abroad are exempt. Student grants and scholarships Income where DIRT (Deposit Interest Retention Tax) has already been paid Certain salary sacrifice schemes, such as the TaxSaver Commuter Ticket Scheme and the Cycle to Work scheme

28 USC - exemptions Statutory redundancy payments Foster care payments Child Benefit Rent a Room Relief More details can be found at: _social_charge.html

29 Salary Sacrifice

30 Salary Sacrifice The term salary sacrifice is generally understood to mean an arrangement under which an employee agrees with the employer to take a cut in remuneration and in return the employer provides a benefit of a corresponding amount to the employee (in this case a bus/rail or ferry pass). As a general rule (there is an exception to this general rule in the case of Approved Profit Sharing Schemes, provided certain conditions are met), Revenue does not regard salary sacrifice arrangements as reducing the employee s taxable income. If an employee forgoes salary payable under an existing contract of employment in exchange for a benefit, the employee remains taxable on the "gross" income payable. This is in contrast to the position where an existing contract of employment is bona fide renegotiated so as to provide a mixture of salary and benefits. In those circumstances the employee will be taxed on what he or she gets, i.e. the cash salary plus the taxable value of the benefit-in-kind, provided the new employment contract involves no right on the employee s part to choose between cash and benefits.

31 Salary Sacrifice Where remuneration is entirely discretionary and the employee has no prior entitlement to it (e.g. a bonus), the discretionary payment may be made by way of a benefit, and be treated for tax purposes as a benefit, provided such an arrangement precedes any "entitlement" to the bonus etc. Where a benefit is fully taxable in the hands of the employee it generally makes little difference in terms of income tax whether the charge is on the "gross" remuneration or on a mixture of cash salary and benefits. Where a benefit is not taxable, as in the case of bus/rail and ferry passes coming within Section 118(5A), there is a tax saving to the employee if arrangements can be put in place under which the provision of a bus/rail or ferry pass by the employer can legitimately be classified as a benefit-in-kind i.e. an "expense incurred" by the employer under Section 118(5A). The conditions are as follows: There must be a bona fide and enforceable alteration to the terms and conditions of employment (exercising a choice of benefit instead of salary)

32 National Minimum Wage

33 National Minimum Wage January 2017 Minimum Hourly Rate Experienced adult worker Aged under First year from date of employment aged over 18 Second year from date of employment aged over 18 Employee aged over 18 in a structured training during working hours st one third period nd one third period rd one third period % of minimum wage

34 National Minimum Wage To calculate the hourly rate, take the gross pay and divide by the actual hours worked The following payment types cannot be included in the calculation Overtime premium Call out premium Service pay Unsocial hours premium Public holiday or weekend premiums ER pension contributions Compensation for injury or loss of tools Allowances for special/additional duties Standby or on call allowances Certain absence pay Redundancy Advances BIK (except board & lodging) Suggestion scheme award Employer Loan Tips Certain leaving payments Payments not related to employment

35 National Minimum Wage Working hours for the calculation are whichever is the greater of: The hours set out in any document such as a contract of employment, collective agreement or statement of terms of employment or The actual hours worked or available for work and paid "Working hours" include: Overtime Travel time where this is part of the job Time spent on training authorised by the employer and during normal working hours

36 National Minimum Wage Working hours for the calculation are whichever is the greater of: The hours set out in any document such as a contract of employment, collective agreement or statement of terms of employment or The actual hours worked or available for work and paid "Working hours" do not include: Time spent on standby other than at the workplace Time on leave, lay-off, strike or after payment in lieu of notice Time spent travelling to or from work i.e. ordinary commuting

37 National Minimum Wage Pay reference period: The employer selects the pay reference period, from which the average hourly pay will be calculated this can be a week or 2 weeks but not longer than a month The employer must include details of the pay reference period in the statement of employment conditions to be given to an employee Your employee may request a written statement from you of their average rate of pay for any pay reference period within the last 12 months. The employer has 4 weeks to supply the statement Exceptions to those entitled to receive the national minimum wage: The legislation does not apply to a person employed by a close relative (for example, a spouse, civil partner or parent) nor does it apply to those in statutory apprenticeships

38 National Minimum Wage Exemption for employer If an employer cannot afford to pay the national minimum wage due to financial difficulty the Labour Court may exempt an employer from paying the rate for between 3 and 12 months The employer must apply to the Labour Court for the exemption with the consent of a majority of the employees, who must also agree to be bound by the Labour Court decision

39 National Minimum Wage Exemption for employer The employer must demonstrate that they are unable to pay the national minimum wage and that, if compelled to do so, would have to lay-off employees or terminate their employment Only one such exemption is allowed An exemption may only be sought from paying the full rate of the national minimum wage i.e. 100% and not for cases covered by the reduced rate e.g. employees who are under 18

40 GROSS TO NET CALCULATION

41 Income Tax

42 Income Tax At the start of the tax year, the Revenue Commissioners will send a Notice of determination of tax credits and standard rate cut-off point to employees. Revenue will also send a summary of this certificate to employers A revised certificate will be issued if there a changes in circumstances e.g. maternity leave

43 Income Tax Tax is charged as a percentage of income The first part of income, up to a certain amount, is taxed at 20% The remainder of income is taxed at the higher rate of tax, 40% The amount earned before the employee starts to pay the higher rate of tax is known as the standard rate cut-off point

44 Income Tax % 40% Single person 33,800 Balance Married/civil partnership only one person earning 42,800 Balance Married/civil partnership both earning 42,800 with increase of 24,800 max Balance One parent family 37,800 Balance

45 Income Tax Example of standard rate cut-off point for a married couple or civil partners with two incomes In 2017, the standard rate cut-off point for a married couple or civil partners is 42,800 If both are working, this amount is increased by the lower of the following: 24,800 in 2017 or The amount of the income of the spouse or civil partner with the smaller income

46 Income Tax Example of standard rate cut-off point for a married couple or civil partners with two incomes If one person is earning 48,000 and their spouse or civil partner is earning 25,000: The standard rate cut off point for the couple is 42,800 plus 24,800. The increase in the standard rate band is not transferable between spouses or civil partners, The first spouse or civil partner's tax bands would be calculated as 20% = 8,560 and 40% = 2,080 The second spouse or civil partner's tax bands would be calculated as 20% = 4,960 and 40% = 80

47 Income Tax Tax credits reduce the amount of tax that employees have to pay So tax is calculated as a percentage of income whilst the tax credit is deducted as a flat rate to reduce the amount of tax that employees have to pay Employees may be entitled to various tax credits depending on their personal circumstances You can get more information about the different types of tax credits and reliefs at _and_reliefs/

48 Income Tax A tax allowance reduces the amount of tax that an employee has to pay The amount a tax allowance will reduce the tax due depends on the employee s highest rate of tax because the allowance is subtracted from income before it is taxed In effect, it is taken off the top of income which can then be taxed at either the standard rate or the higher rate, depending on the income level This is known as tax allowance at the marginal rate By taking these allowances into account when calculating income tax this will adjust the the employee s standard rate cut-off point

49 Income Tax Before calculating income tax, subtract the following from the total income including benefits in kind: Pension contributions Payments to a Permanent Health Benefit Scheme (to a maximum of 10% of income) Tax allowances Work expenses that were necessary to carry out work duties The taxable pay is then taxed at 20% up to the standard rate cut-off point. The amount in excess of the cut-off point is taxed at 40% The value of tax credits is then subtracted from this to give the amount of tax that has to be deducted

50 Emergency Tax and Temporary Tax Where an employee has a PPS number but no P45 the following is applied Wks 1 4 Each week 1/52 of the persons tax credit and the single person cut off rate is applied and tax is at 20% up to the cut off and 40% for earnings in excess Wks 5 8 No tax credit is given but 1/52 of the single person cut off rate is applied each week. tax is at 20% up to the cut off and 40% for earnings in excess Wks 9 onwards No tax credit and no cut off point, tax at 40% is applied

51 Emergency Tax and Temporary Tax Where an employee has doesn t provide a a PPS number no tax credits or cut off rates are applied and all earnings are taxed at 40% Where an employee has a PPs number and a P45 then temporary tax is applied The tax code detailed on the P45 is applied at a wk1/mth1 basis

52 Income Tax If employees are on low pay they may not be liable to pay tax because their tax credits and reliefs are more than or equal to the amount of tax they are due to pay Employees are completely exempt from income tax if they are over 65 and their income is below certain limits The amount of tax an employee pays depends on the amount of the income earned and on their personal circumstances

53 Income Tax Employees over pensionable age can claim marginal relief The tax liability would be calculated as follows: Total income: 40,000, less Low income exemption limit: 36,000 Gives 4,000 as the amount by which the income exceeds the limit Marginal relief restricts the tax payable to 40% of this 4,000 x 40% = 1,600

54 Income Tax - example If income exceeds the limits for low income exemption, but is less than twice the amount of the limit then marginal relief can be claimed Under marginal relief, tax is applied only on the amount by which income exceeds the limit, but a rate of 40% applies to this amount Example: Cormac is 66 years of age and is married. His total income for 2016 was 40,000. Under the usual method of calculating his tax liability it would be 2,560 but under marginal relief it would be 1,600 (4000 * 40%)

55 Income Tax - example Example: Under the usual method the tax liability is calculated as follows: The income is below the standard rate cut-off point so all of it is taxed at the standard rate of 20% 40,000 x 20% = 8,000 gross tax His tax credits are: Married: 3,300 PAYE: 1,650 Age: 490 Total 5,440 The tax credits are subtracted from the gross tax to give the tax payable 8,000-5,440 = 2,560

56 Tax Treaties Ireland has signed comprehensive Double Taxation Agreements with 73 countries, all of them are in effect.. The Agreements cover direct taxes which in the case of Ireland are income tax, universal social charge, corporation tax and capital gains tax.

57 Income Tax Private Use of Company Car

58 Income Tax Where an employee claims their private travel is less than 8,047kms, the employer must calculate the taxable benefit by reference to a minimum of 8,047 private kms pa unless the employee provides evidence to show that the private travel is less Documentary evidence such as a log book of business journeys and distance travelled would be acceptable However where private travel is in excess of 8,047 kms pa the actual private travel figure (supported by documentary evidence) must be taken for the purposes of calculating the notional pay The weekly and monthly equivalents of 8,047 kilometres annual private travel are 155 kilometres per week and 670 kilometres per month

59 Income Tax Having calculated the cash equivalent amount, deduct any amount made good by the employee towards the cost of providing or running the car Where an employee makes a lump sum contribution to the employer towards the purchase price of a company car, the amount contributed is regarded as an amount made good by the employee in the first tax year the benefit is chargeable In the case of certain employees whose annual business travel does not exceed 24,140 kilometres, the cash equivalent of 30% of OMV may be reduced by 20% giving an effective cash equivalent of 24% of OMV

60 Income Tax This alternative basis is available where the following conditions exist. The employee: works an average of not less than 20 hours per week travels at least 8,047 business kilometres per annum on the employer's business spends at least 70% of his or her working time away from the employer's premises retains a log book detailing business kilometres, business transacted, business time travelled and date of journey, and the log book is certified by the employer as being correct

61 Income Tax Best estimates to be used until the end of the year The estimated notional pay based on the estimated business kilometres should be added to the employee's salary and PAYE and PRSI calculated on the aggregate amount Prior to the end of the tax year, the best estimate should be reviewed to determine its accuracy Any adjustments necessary to the cumulative notional pay charged to date should be incorporated in the remaining pay periods for the year having gone back to the pay period in question and recalculated the PAYE/PRSI Where the adjustment only affect's the employee's PAYE liability, this can be rectified in the current pay period without revisiting the earlier pay period

62 PRSI

63 PRSI Note: This threshold only applies to Class A employees, whose total earnings in each week of the fortnight or month are at least 38. * PRSI credit applies ** PRSI credit applies to earnings up to 424 Subclasses A8 and A9 are only used for CE participants. Subclasses A4, A6 and A7 are only used for existing approved employees under the Employer's PRSI Exemption Scheme. For further information contact Employment Support Services, telephone:

64 PRSI Class A employment is the most common class and is applicable to employees over 16 and under 66 Participants in Community Employment who are paid 352 or less in any week should be recorded under Subclass A8 In any week that the pay is more than 352 record under subclass A9 Community Employment supervisors and employees on apprenticeship schemes are insurable at Class A in the normal way The Class J contribution normally relates to people paid less than 38 per week (from all employments) and is also used for employees aged 66 or over and people in subsidiary employment

65 PRSI Other classes Class B permanent and pensionable civil servants; doctors and dentists employed in the civil service and Gardaí where they are recruited prior to 1995 Class C commissioned officers in the defence forces and the army nursing service recruited before April 1995 Class D permanent and pensionable employees in the public service others than those included in Class B & C, recruited before April 1995 Class H NCOs and enlisted personnel in the defence forces

66 PRSI Other classes Class M nil contribution liability e.g. under 16 or over 66, people in receipt of an occupational pension or lump sum termination payments or public office In any week that an employee is paid more than 500, it should be recorded under subclass B1, C1, H1, J1 or S1, where appropriate. Class B, C, D or H employees paid up to 352 in any week should be recorded under subclass BO, CO, DO or HO. Class B, C, D or H employees paid between and 500 should be recorded under subclass BX, CX, DX or HX.

67 PRSI For people covered under Class J or S and paid up to 500 inclusive in any week, record under subclass O, that is, JO or SO as appropriate. PRSI classes B, C and D will pay PRSI at 0.9% up to 1,443 a week and 4% above 1,443 a week. Class K applies to: Modified rate contributors with self-employed earned income and any other unearned income Employed contributors and occupational pensioners, aged under 66 years, whose only additional income is unearned income may be liable to PRSI on this income at Class K Civil and public servants will pay PRSI on the 'Pension Levy' portion of their salaries. Civil and public service employers do not have to pay any employer PRSI on the 'Pension levy'

68 PRSI The Pay Related Social Insurance (PRSI) contribution is made up of a number of different components including: Social insurance at the appropriate percentage rate for employees and employers, which varies according to the pay and PRSI Class of the employee and benefits for which he or she is insured The 0.70% National Training Fund Levy, included in the employer's contribution in Classes A and H PRSI

69 PRSI PRSI contributions will be payable as follows: At the appropriate percentage rates for employees on all reckonable earnings On all reckonable pay, the employer's share (social insurance and the 0.70% National Training Fund Levy in classes A and H) is due Class S (self employed, company directors, and people with income from investments and rent) social insurance at 4.00% on all reckonable income The National Training Fund Levy is included in the contribution rates outlined in the PRSI Classes sections where applicable PRSI

70 PRSI PRSI is calculated on the employee's reckonable pay The net value of share-based remuneration is to be treated as notional pay for the purposes of calculating employee PRSI only Employee PRSI only is payable on share-based remuneration The obligation to deduct and remit PRSI in respect of share-based remuneration generally rests with the employer Different arrangements may apply in the case of PRSI on gains from the exercise of certain share options

71 PRSI PRSI is fully chargeable on payments by employees in respect of: Superannuation contributions Permanent health benefit schemes (including income continuance schemes) Revenue approved schemes established under irrevocable trusts, overseas pension schemes and other Revenue exempt approved schemes Personal Retirement Savings Accounts Revenue approved retirement funds

72 PRSI Sub Class Weekly Pay Band How much of pay Employee % Employer % AO All Nil 8.5 AX All AL All A1 More than 424 All A8 Up to 352 All Nil 0.5 A9 Over 352 All BO Up to 352 All Nil 2.01 BX All B1 500 and over First Balance C0 Up to 352 All Nil 1.85 CX All C1 500 and over First Balance

73 PRSI 2016 saw the introduction of a reducing PRSI credit. Calculations need to account for this credit

74 PRSI Class A PRSI Credit Class A employee PRSI will continue to be calculated at 4% of gross weekly earnings. For gross earnings between and 424 in a week, the 4% PRSI charge will be reduced by a new PRSI Credit. The amount of the PRSI Credit depends on gross weekly earnings. At gross weekly earnings of , the maximum PRSI Credit of per week applies. For earnings between and 424, the maximum weekly PRSI Credit of 12.00, is reduced by onesixth of earnings in excess of The calculation of the new PRSI charge for Class A, with gross weekly earnings between and 424, involves 3 separate calculations: Calculate the PRSI Credit Calculate the PRSI 4% Deduct the PRSI Credit from the 4% PRSI charge

75 PRSI The following example shows how to calculate the PRSI Credit and the new PRSI charge, for gross weekly earnings of 377 Calculate the PRSI Credit: 1. Maximum PRSI Credit One-sixth of earnings in excess of ( 4.17) ( = / 6) Reduced PRSI Credit Calculate the PRSI 4% Deduct the Reduced PRSI Credit from the 4% PRSI Charge 7.83 New 2017 weekly PRSI Charge 7.25

76 PRSI Sub Class Weekly Pay Band How much of pay Employee % Employer % D0 Up to 352 All Nil 2.35 DX All D1 More than 500 First Balance H0 Up to 352 All Nil HX All H1 More than 500 All J0 Up to 500 All Nil 0.5 J1 500 and over All Nil 0.5

77 PRSI Sub Class Weekly Pay Band How much of pay Employee % Employer % M Up to 100 All Nil Nil K1 More than 100 All 4 Nil S0 Up to 500 All 4 NA S1 Over 500 All 4 NA Since 2011, certain public office holders pay PRSI at a rate of 4% on all income, where their income is over 5,200 a year. They should be returned at Class K. Public office holders with weekly income of 100 or less should be returned at Class M. Class K may also apply in other circumstances Class M relates to people with a nil contribution liability (such as employees under age 16, people aged 66 or over (including those previously PRSI liable for Class S), persons in receipt of occupational pensions or lump-sum termination payments and public office holders with a weekly income of less than 100 a week). Class S is for self-employed so there are no employer contributions

78 USC

79 USC USC is payable on gross income, including notional pay, after any relief for certain capital allowances, but before pension contributions There is a surcharge of 3% on individuals who have non-paye income that exceeds 100,000 in a year. Self employed income in excess of 100,000 a year is subject to USC at 11%

80 USC Reduced rates of USC apply to: People aged 70 or over whose aggregate income for the year is 60,000 or less Medical card holders aged under 70 whose aggregate income for the year is 60,000 or less Aggregate income for USC purposes does not include payments from the Department of Social Protection. Income Band Rate Income up to 12, % Income over 12, %

81 USC Universal Social Charge is deducted on a cumulative basis - similar to the way in which PAYE is deducted Employers and pension providers are responsible for deducting the Universal Social Charge from their employees salaries. They deduct and pay it to Revenue on behalf of employees. Employer Tax Credit Certificates (P2Cs), as well as displaying PAYE rates and cut-off points, also show USC rates and cut-off points Employees should inform Revenue of any changes in circumstances

82 USC Details of the Universal Social Charge should be recorded separately on the payslip and the total amount of USC paid should be shown on the P60 each year The form P45 must show pay, tax, USC, and PRSI details for the year up to the date you leave Employers need to: Identify Gross Income as defined Deduct the USC from this income at the appropriate rates Pay the total amount of the USC deducted from your employees on form P30 to the Collector General At end of year give details of the USC on form P35L Employer/pension providers should pay the USC to the Collector General at the same time and in the same manner as the deductions under the PAYE system

83 USC Penalties similar to those that apply where the employer/pension provider fails to operate PAYE correctly will apply for failure to operate the USC Interest will be payable on late payments of the USC to the Collector General The employer/pension provider is only responsible for deducting the USC from income, including notional pay, which he or she is paying to an employee. They are not required to take account of income arising from other sources USC

84 USC The deduction of USC is cumulative, similar to the way PAYE is deducted Employers/pension providers shall record the following particulars in relation to every payment of relevant emoluments that the employer makes to or on behalf of the employee: The date of the payment, The amount of the relevant emoluments, and In relation to the date of payment - the cumulative relevant emoluments the cumulative USC, and the amount of USC, if any, deducted or repaid on making the payment of relevant emoluments

85 USC Details of the USC should be recorded separately on payslips. USC is reported on the following forms: P30 P35 Declaration P35 L P35 LT P60 (template) Forms P45 and P45 Supplement

86 USC Where lower rates of USC apply in certain circumstances, these lower rates are stated on the Tax Credit Certificate (P2C) issued by Revenue Where an employee advises their employer they are aged 70 years or will reach 70 years in the tax year, or that they hold a full medical card, the employee should be instructed to contact their Revenue office to request a revised P2C issued Where exemption from USC applies, this will be stated on the P2C Employers are not to apply the lower rates or exemption threshold themselves, but must instead operate strictly on the figures stated on the P2C issued by Revenue

87 Example of a pay calculation based on a 4 weekly payroll

88 Tax Calc Annual salary 20,000 = weeks Single person tax rate cut off point is 33,800 pa = per 4 weeks Basic personal tax credit = 1650 pa = per 4 weeks Basic PAYE tax credit = 1650 pa = per 4 weeks Because the cut off point is greater than the pay in the period all pay will be at 20% tax Gross 4 weekly tax at 20% = 1538 * 20% = Less 4 weekly tax credits ( ) = Total tax due is If the tax credits were deducted before the tax is calculated then someone at 40% tax would receive a greater benefit

89 PRSI Calc Classs A Class A - Class AL = , per 4 weeks PRSI is paid at 4% of all earnings for the employee and 10.75% for the employer Calculate the PRSI Credit: Maximum PRSI Credit to be reduced by one-sixth of earnings in excess of Earnings are per week: ( = / 6) = 5.43 * 4 = Reduced PRSI Credit 12.00*4 = 48 ( 21.74) Calculate the PRSI 4% = ( *4 *4%) Deduct the Reduced PRSI Credit from the 4% PRSI Charge ( 26.26) New weekly PRSI Charge Employer PRSI payment = * 10.75% =

90 USC Calc On first 12,012pa = 924 per 4 weeks = 0.5 % = 9.24 On the next 6759 = per 4 weeks = 3% = On the next 51,271 = per 4 weeks = 5% = * 5% = 4.73 Total USC = = 29.57

91 Gross to Net Total pay Tax PRSI USC Net Pay

92 Useful Links onditions/leave_and_holidays/public_holidays_in_ireland.html tal_leave_acts.pdf onditions/contracts_of_employment/contract_of_employment.html UK contact for Geert Hofstead

93 End of Session Please contact the GPA with questions or to leave feedback, which is always welcome