Employment tax updates from Revenue: January 2021

19 January, 2021

Here, we look at some recent developments and updates from Revenue in relation to COVID-19 concessions. Unfortunately, the most recent update issued by Revenue, seems to indicate that it is not planned to extend a number of the COVID-19 related concessions beyond 31 December 2020. However, we hope, given the introduction of the additional restrictions in January 2021, Revenue will consider reintroducing at least some of the concessions from 1 January 2021.

The uncertainty around Brexit continues to occupy the headlines. However, we bring some positive news in relation to the new protocol on social security in the Brexit Trade Agreement, as well as the Ireland/UK Bilateral Social Security Agreement.

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Residence rules: Force majeure circumstances

Force majeure circumstances apply where an individual is prevented from leaving Ireland, due to exceptional circumstances beyond his/her control so that the time spent in Ireland after the planned date of departure is disregarded for the purpose of determining his/her tax residence in Ireland.

In March 2020, Revenue updated their guidance and confirmed that an individual, who was prevented from leaving Ireland due to COVID-19, would be considered to fall within the force majeure circumstances. As a result, individuals would not be regarded as being present in Ireland for tax residence purposes after their intended departure date provided that they were unavoidably present in Ireland only due to force majeure circumstances.

This guidance was issued at the beginning of the pandemic and as the year wore on, significant questions arose as to who exactly would be covered by this concession, given the many different stages of the restrictions throughout the year. 

On 22 December 2020, Revenue updated their guidance and outlined the circumstances that they regard as falling within this force majeure concession. 

In summary, Revenue will not consider any days spent in Ireland after 18 May 2020 as falling within the concession and for individuals who arrived in Ireland on or after 6 May the concession will not apply.

An individual's days in Ireland will only be disregarded where all of the following conditions are met:

  • They arrived in Ireland on or before 5 May 2020;
  • They were prevented from departing Ireland in the following specific circumstances:
    • The individual or family member with whom they are travelling has COVID-19 or are self-isolating in Ireland either on the advice of health professional, public health guidance or self-imposed;
    • The individual has received medical advice not to travel;
    • Their employer has requested them not to travel;
    • The individual cannot travel to their home/destination country due to border controls/restrictions in that country; or
    • Commercial flights to that country are not available
  • They maintain their tax residence in the foreign/home country; and
  • They departed Ireland as soon as reasonably possible, and on or before 1 June 2020, whichever is the earlier date (except in cases where individual contracted COVID-19 which prevented departure by that date)

The maximum length of time that may be disregarded for tax residence purposes will depend on which of the following categories an individual falls into, based on when they travelled to Ireland:

Arrival in Ireland Days in Ireland disregarded for tax residence
On or prior to 23 March 2020 Period from the day after original planned date of departure up until 18 May 2020, or actual departure date, whichever is the earlier
Between 24 March and 5 May 2020 Period from the day after original planned date of departure up until 18 May 2020, or actual departure date, whichever is the earlier. This is subject to a maximum of 30 days from date of arrival permitted in all circumstances, except in cases where an individual contracted COVID-19 which prevented departure by that date (even then, days can only be disregarded up to 18 May 2020)
On or after 6 May 2020 No days can be disregarded

Any individual wishing to rely on this concession must maintain appropriate records of supporting facts and circumstances, in the event requested by Revenue. 

While clarification from Revenue on the force majeure concession is obviously welcome, it does mean that individuals who would otherwise have been non-resident in Ireland in normal circumstances but have spent significant time here in 2020 (e.g. working remotely from a home in Ireland) may now find themselves Irish tax resident. This could significantly impact their individual income tax obligations for 2020.

Going forward for 2021, with the new restrictions recently being imposed in many countries, it also raises the question of whether any concessions regarding tax residency for individuals prevented from leaving Ireland will apply for the coming year.

Foreign employments – Operation of PAYE

PAYE dispensations

The temporary relaxation of the 30-day notification requirement, to apply for a dispensation from the obligation to operate PAYE in respect of short-term business visitors to Ireland (from countries which Ireland has a Double Tax Agreement), ended on 31 December 2020. With effect from 1 January 2021, Revenue plan to reimpose the usual 30-day time limit for applications.

Operation of PAYE for foreign employees

Revenue will not seek to enforce Irish payroll obligations in 2020 for foreign employers in genuine cases where an employee was working abroad for a foreign entity prior to COVID-19 but relocated temporarily to Ireland during the COVID-19 period and performed the duties of their foreign employment while in Ireland.

For 2020, Revenue will also accept a foreign employer operating Irish PAYE based on a non-resident employee’s pre COVID-19 work pattern where a non-resident employee was carrying out duties partially in Ireland and in a foreign country prior to COVID-19 but as a result of COVID-19 travel restrictions, the employee was unable to return to the foreign country and continued to perform the duties of their employment in Ireland.

These relaxations will no longer be available from 1 January 2021 and PAYE is expected to be operated as normal where required. These concessionary measures only apply to the employer’s PAYE obligations and do not remove any underlying income tax liability that an individual may have as a result of their time spent working in Ireland during 2020.

Irish employments - PAYE Exclusion Orders

Where there is a PAYE Exclusion Order in place for an Irish employee who is working abroad, and the employee works more than 30 days in Ireland as a direct result of COVID-19, such a period of time will not adversely impact the validity of the PAYE Exclusion Order for 2020. However, this concession only provides for a temporary relaxation of the employer’s PAYE obligations for 2020. From 1 January 2021 onwards, where such employees spend 30 days or more working in Ireland the employer will be required to operate PAYE on such employments in the normal manner.

The concessionary measure only applies to the employer’s PAYE obligation and does not remove any underlying income tax liability that an individual may have as a result of the time spent working in Ireland during 2020.

As part of the guidance that issued on 21 December 2020, there were also some welcome clarifications from Revenue regarding COVID-19 testing and flu vaccinations.

COVID-19 testing

Given the ongoing health and safety concerns for employers, Revenue have confirmed that a Benefit In Kind (BIK) will not arise on COVID-19 testing of employees. This includes:

  • Testing employees at the workplace;
  • Employers engaging third parties to perform testing on their behalf; or
  • Providing home testing kits to employees.

Flu vaccinations

Revenue confirmed that flu vaccinations facilitated by employers in 2020 will not attract a BIK charge. In previous years, it was Revenue practice that only flu vaccinations administered in the workplace were not considered a taxable benefit.

If an employee has incurred the cost of a flu vaccination themselves, they can claim a tax credit for this health expense in their 2020 tax return.

Company car BIK calculation

In light of the COVID-19 restrictions introduced in 2020, Revenue recognised the resulting impact on business mileage for employees who continued to have the use of company cars.

As a result, Revenue announced a concession whereby an employee’s annual company car BIK could be calculated by reference to the January 2020 business mileage undertaken.    

In the recent update, Revenue announced that this measure would cease to apply on 31 December 2020. However, Revenue have just confirmed that this concession will remain in place in the short term, owing to the current restrictions, but will be kept under constant review.

Employers are reminded of the requirement to retain accurate records that support the business mileage figure for January 2020 used to calculate car benefit in kind figures in 2020 and 2021.

Concessionary BIK measure ending

The concessionary measures introduced in early 2020, that  removed the benefit in kind charge on the payment / reimbursement of holiday or flight cancellations to assist integral employees to return to Ireland to deal with COVID-19 crisis ceased to apply from 1 January 2021.

SARP applications

During 2020, Revenue extended the strict 90-day application filing deadline for the Special Assignee Relief Programme (SARP), by 60 days in order to allow sufficient time for employers to file a completed application. Revenue have confirmed that this temporary extension will no longer apply for employees arriving in Ireland from 1 January 2021.

Given the prolonged delays in obtaining Personal Public Service Numbers (PPSN), required for the SARP application form, coupled with the latest COVID-19 restrictions, it is likely that meeting the 90-day deadline will be challenging. We hope to see a further update from Revenue on this shortly or at least agreement that they will accept late submissions on exceptional basis.

Tax return deadline - Real time foreign tax credit for Restricted Stock Units cases

Similar to 2019, Revenue confirmed that the tax return filing deadline for employees where real time foreign tax credits have been claimed through payroll in 2020 will be the normal tax return filing deadline of 31 October 2021. 

The employer notification will remain 31 March 2021.

Employment Wage Subsidy Scheme (EWSS)

The Finance Act 2020 confirms the introduction of a new basis period for EWSS eligibility for 2021 pay dates. The period of assessment to be used to establish whether an employer’s turnover (or customer orders) has reduced by 30% will typically be based on a comparison between 1 January 2021 to 30 June 2021 and 1 January 2019 to 30 June 2019.  Alternative rules apply in start-up situations. 

Employers must look at the period “as a whole” rather than on a monthly basis.  It should also be noted that at the start of each month the employer must review their eligibility to ensure they are satisfied that they continue to meet the criteria, and if not, to deregister from the scheme and cease claiming the subsidy immediately.

The current rates of the subsidy are currently due to remain in place until 31 March 2021, although this may be subject to further changes.

Gross weekly pay Rate of subsidy to employer
Less than €151.50 Nil
€151.50 - €202.99 €203
€203 - €299.99 €250
€300 - €399.99  €300
€400 - €1,462 €350
Over €1,462 Nil

Social security: Brexit update

The Brexit Trade Agreement concluded over the Christmas period included a new protocol on Social Security Coordination between the EU and the UK. From 1 January 2021, the current EU coordination rules on social security were replaced by the new protocol within the Trade and Cooperation Agreement.

The new agreement ensures that EU and UK citizens who move between EU Member States and the UK from 2021 onwards will continue to only be liable to pay social security contributions in one State at a time. By default, this will be in the State where the work is undertaken.

However, similar to the EU social security regulations, there are provisions for multi State workers (individuals who commute regularly between countries and perform duties in multiple jurisdictions on an ongoing basis) and “detached workers” (typically referred to as posted workers under the EU regulations). 

Detached workers can remain on their ‘home country’ social security system for up to 24 months of an assignment. It should be noted that an exceptions clause has not been included in the protocol. Under the EU Regulations, an exceptions clause was commonly used to enable A1 certificates to be extended beyond the allowable 24 months for detached workers.

The absence of this clause would be important for organisations to consider at the commencement of new assignments from 2021 onwards, and whether it would be appropriate to limit the assignment to no more than 24 months to enable individuals to remain in home country social security. 

Note that for Irish and UK citizens, a bilateral agreement (see further information below) has been signed between the two States for Irish and UK citizens, which does contain an exceptions clause.

As a result this 24 month limit for detached workers will likely just be a consideration for EU citizens moving between Ireland and the UK, who are not citizens of either State. 

EU States have been given the option to ‘opt out’ of the detached worker protocol, and have up until 1 February 2021 to do so. This would result in individuals on outbound assignments to these countries becoming liable to social security in that country from day one. It is not anticipated that Ireland will opt out of this, however it is unclear whether other EU States may take this approach for inbounds from the UK.

Ireland/UK Bilateral Social Security Agreement

Separate to the EU agreement outlined above, the Social Welfare (Convention on Social Security between the Government of Ireland and the Government of the United Kingdom of Great Britain and Northern Ireland) Order 2020 also came into force on 1 January 2021. The purpose of the Convention is to ensure that the social security rights and entitlements enjoyed by Irish and British citizens under the Common Travel Area (CTA) arrangements are maintained after the United Kingdom leaves the European Union, and will ensure Irish and British citizens that have worked or are working in both States are not impacted by Brexit with regards to social security rights and entitlements.

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