The impact and effect of Finance Bill 2020 on employment and individual taxes

22 October, 2020

The majority of legislative measures in Finance Bill 2020 in relation to employment and individual taxes mirror the announcements on Budget day. It includes provisions relating to USC band changes, increases to certain credits such as the Earned Income Credit for the self-employed and the Dependent Carer Credit and extension of the Help-to-buy Scheme. Other measures not previously announced include new and amended provisions relating to share schemes. In addition to Finance Bill changes, Tax and Duty Manual Part 05-02-13 in relation to e-working and tax has also been updated by Revenue.

The key employment and individual tax measures introduced in Finance Bill 2020

Finance Bill 2020 includes legislation to enact Budget day announcements including changes to USC bands, the Dependent Carer Credit, the Earned Income Credit for the self-employed and the Help to Buy Scheme.
The bill puts on a legislative footing the fact that the Pandemic Unemployment Payment is to be considered taxable for individuals. It also includes changes announced on Budget day to the Employment Wage Subsidy Scheme and Tax Warehousing Scheme.
The bill also includes mandatory reporting and mandatory electronic reporting for certain employee share schemes.
Finance Bill 2020 does not contain any additional reliefs to support the significant number of employees who are now working from home. However, Revenue have updated their guidance in relation to e-working and Tax to clarify the ability to claim broadband costs.

COVID-19 measures

Finance Bill 2020 confirms that the Pandemic Unemployment Payment and COVID-19 Pandemic Unemployment Payment is a taxable emolument for income tax purposes.

While not specifically in the Finance Bill, the Employment Wage Subsidy Scheme was recently amended to bring it in line with amendments to the Pandemic Unemployment Payment, bringing the top rate of payment back up to €350 per week for employees who earn over €400 per week. The revised scheme will run to the end of January 2021.

Finance Bill 2020 also provides for the inclusion of certain proprietary directors within the Employment Wage Subsidy Scheme from 1 September 2020.

The provisions have also confirmed the extension of the tax warehousing scheme to include repayments of Temporary Wage Subsidy Scheme (TWSS) funds owed by employers. The scheme will operate on a similar basis to the existing warehousing scheme for employer PAYE and VAT liabilities and will only apply to employers who as a consequence of COVID-19 are unable to pay their relevant tax and who have filed all relevant PAYE and TWSS returns. All SMEs whose tax affairs are dealt with in Revenue's Business Division or Personal Division will qualify automatically and others will need to contact Revenue. The bill also provides for the warehousing of "COVID-19 income tax" which relates to the 2019 income tax liability and 2020 preliminary tax liability for the self-employed.

Personal tax thresholds, exemptions and credits

Finance Bill 2020 includes the changes to USC bands as announced in Budget 2021 to take into account recent increases in minimum wage. The Dependent Carer Credit is increased to €245 and the Earned Income Credit for the self-employed is increased to €1,650.

The Help to Buy scheme in its current enhanced format has also been extended to the end of 2021. Under the provisions, the current expiry date on the availability of the enhanced relief of 5% of purchase price or €20,000 to 10% of purchase price or €30,000 has been extended from 31 December 2020 to 31 December 2021.

Share awards

Finance Bill 2020 provides for mandatory reporting of information by employers in relation to awards of shares to directors and employees, except where the employer is already obliged to report the information. It also extends the scope of reporting to include awards given in the form of cash or where a discount on shares is provided and mandatory electronic reporting. The Bill also continues the moves in recent years towards e-filing of awards under share plans by providing for mandatory e-filing of restricted share, forfeitable share and convertible securities plans in a format to be prescribed by Revenue.

Remote working

While employees will broadly welcome the support for businesses announced in Budget 2021, and by extension for their jobs, the vast majority would have liked further support when it comes to working from home. Unfortunately, Finance Bill 2020 does not contain additional reliefs to support the significant number of people who are now working remotely, however, Revenue have updated the Tax and Duty Manual Part 05-02-13 in relation to e-working and tax. The key changes and clarifications include:

Where an expense is shared the cost can be apportioned based on the amount paid by each individual
Capital items such as laptops, computers, office equipment and office furniture purchased by an employee are not considered a tax deduction for income tax
A deduction for 30% of broadband expenses incurred from 2020 onwards for the duration of the pandemic only, can be claimed for days working from home
The normal place of work during the period of COVID-19 continues to be the office

We await the report from the interdepartmental group tasked with developing the country's remote-working strategy. Further measures to support working from home arrangements, which are likely to continue for many months to come, would be welcome.

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