COVID-19: Temporary wage subsidy scheme (TWSS) – Reconciliation phase

14 October, 2020

The Revenue Commissioners have announced the third and final formal stage of the Temporary Wage Subsidy Scheme (TWSS): the Reconciliation process. This follows the cessation of the TWSS on 31 August 2020. The purpose of the Reconciliation phase is three fold:

It represents a detailed compliance review by Revenue to ensure that subsidy payments reported by employers were passed onto employees;
It will inform Revenue of the amount of TWSS to be refunded to employers or to be refunded to Revenue (discussed in further detail below); and
It will ensure Revenue's records are correct when notifying employees of the additional tax and USC due as part of the employee year-end reconciliation

In addition to reporting TWSS details to Revenue, employers will be required to report any payments delivered to employees under the Employer Refund Scheme (the predecessor to the TWSS and which ran from 12 March to 25 March 2020).

How will the Reconciliation process work?

The Reconciliation process will operate in two stages:

Stage 1: An employer is required to report the actual subsidy that was paid to employees, for each payslip and each pay date
Stage 2: Revenue will then reconcile all the data reported under Stage 1 comparing each reported payslip for the permissible subsidy due with the subsidy amounts paid by the employer

Failure by an employer to complete stage 1 by 31 October 2020 may result in Revenue seeking to recoup the total TWSS paid to that employer under the Scheme, together with interest.

How will the Reconciliation process (stage 2) work?

Revenue will undertake the reconciliation based on the data provided to it. Revenue will firstly calculate the correct subsidy payable for each employee for each pay period. Revenue will then compare this with the subsidy amounts paid to the employer and issue a Statement of Account to the employer. Any under or over subsidy refund will be paid or repaid to or by the employer.

Revenue have indicated that as part of the reconciliation process, they will make available to the employer a detailed CSV file of the TWSS reconciliation details in Revenue's systems. The employer can use this information to assist them in reconciling their own records.

Alternatively, the employer can request a reconciliation calculation from Revenue. Such a reconciliation will take into account:

Subsidy refunded amount, i.e. the subsidy amount paid by Revenue, less any repayment the employer has made
Caseworker resolved amount: Where a Revenue caseworker has manually calculated the subsidy due, based on TWSS rules and information provided by the employer
Subsidy paid amount: This is the subsidy paid by the employer and as reported to Revenue
Subsidy payable amount: This is the subsidy due as calculated in accordance with the TWSS rules

Revenue have confirmed that:

Caseworker resolved amounts will take priority in the reconciliation
If the subsidy paid amount is less than the subsidy payable amount, then Revenue will use the 'subsidy paid' figure for the purposes of the reconciliation
If the subsidy paid amount is more than the subsidy payable amount and the difference is a small discrepancy, Revenue will reconcile based on the 'subsidy paid' amount.
Where the subsidy paid amount is more than the subsidy payable amount and the difference is greater than a small discrepancy, Revenue will reconcile based on the 'subsidy payable' amount.

Revenue has not defined what is a small discrepancy for the purposes of the reconciliation and will provide further guidance on this matter in due course.

Employee year-end reviews: Further Revenue guidance

Revenue have confirmed that they will issue a 'Preliminary end-of-year statement' to all employees who were in receipt of TWSS and PUP payments. This will reflect the income tax and USC due on these payments.

Revenue have also indicated that the employees can settle the taxes in the following manner:

They may fully or partially pay the liability due through Revenue's "myAccount" facility; or
Revenue will permit the liability due to be collected over four tax years, through reducing the employee's tax credits, such reduction to take effect in January 2022

What do you need to do?

There are a number of things that an employer need to do in the coming weeks:

Meet the reporting deadline of 31 October 2020;
Contact your payroll provider to see how they can assist you in generating and uploading the necessary reports to ROS;
Carefully review the results of the Stage 2 reconciliation process and raise any discrepancies or issues with Revenue at the earliest opportunity;
Consider issuing a staff communication to employees outlining how Revenue's 'Year-end review' will operate, in particular, the Revenue's approach to recovering tax that may be due on TWSS payments

Finally it should also be noted that Revenue still reserves the right to conduct further detailed reviews outside of the reconciliation process, including reviews of eligibility to the Scheme and this is something that may be timely to review, if not already undertaken. If you have any concerns, we can assist you in undertaking a TWSS health check.

We are here to help you

Should you have any queries regarding the above or indeed any aspect of the TWSS, please reach out to your usual PwC contact or any member of the TWSS team.