14 Oct 2020 | 11.17 am
Budget 2021: Employment Taxes
KPMG's Eoghan Quigley says tax debt linkage to EWSS is a welcome move
14 Oct 2020 | 11.17 am
KPMG partner Eoghan Quigley says guidance is needed from Revenue on exactly how remote working expenses will be handled
Employment wage supports
Central to the government’s Covid-19 response to date has been supporting job retention and income protection for employees, with the Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage Support Scheme (EWSS) being instrumental in achieving these aims.
In a welcome move, the minister confirmed that TWSS subsidy repayments due by employers for overpaid subsidies can be included in the tax debt warehousing scheme to provide additional liquidity support for employers affected by Covid-19.
As part of the July Stimulus Plan, the government announced the introduction of the EWSS to replace the TWSS with effect from 1 September 2020. It had previously been announced that the scheme was expected to run until 31 March 2021 and the minister confirmed that further wage subsidy supports will be required beyond this date in 2021.
The government will decide on the form of extended wage subsidies based on the economic landscape at the appropriate time. This will hopefully provide confidence to employers as they navigate through these difficult trading conditions.
On 6 October 2020, the minister for social protection announced a €0.10 increase in the National Minimum Wage to €10.20 per hour from 1 January 2021. To ensure that this increase in the minimum wage would not result in an increase in the level of employer PRSI charged, the Budget provided for an increase in the employer PRSI threshold from €395 to €398 from 1 January 2021. This aligns the employer PRSI threshold with the salary/wages of a full-time employee earning the minimum wage.
As a result of Covid-19, employers and employees across the country have had to adapt very quickly (and in many cases for the first time) to a new remote way of working. The Programme for Government included a commitment to develop a strategy for remote working and the minister confirmed in his Budget speech that an inter-departmental group has been set up to work on this strategy.
While the results of this group are not yet known, the minister did remind us about the measures of relief already in place to support remote working, as follows:
- The ability for employers to contribute towards the expenses of working from home of up to €3.20 per day without a charge to benefit-in-kind arising.
- Alternatively, an employee can make a claim for tax relief directly from Revenue in respect of utility expenses incurred relating to working from home, which include light and heat. Revenue has confirmed that this can now also include the costs of home broadband.
The minister reiterated that claims can also be made for other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of their employment. Historically, this phrase “wholly, exclusively and necessarily” incurred has been interpreted quite narrowly by the Revenue in deciding whether an employee is entitled to tax relief in respect of the expenses incurred, and as such, the terminology has been the subject of many court decisions.
Typically, it must be free from doubt that the employee was required to incur the expense as a part of their employment, that the expense relates solely to the performance of their duties, and that they could not have been expected to carry out their duties without bearing the expense.
This can be a high threshold to reach, particularly when an individual is incurring expenses in their home, so more detailed guidance from Revenue in terms of how they intend to apply these conditions in a remote working context would be very useful.