S.I. No. 613/2003 - Income Tax (Employments) Regulations, 2003

The Revenue Commissioners in exercise of the powers conferred on them by sections 985A (inserted by the Finance Act 2003 (No. 3 of 2003)) and 986 (as amended by that Act) of the Taxes Consolidation Act, 1997 (No. 39 of 1997) hereby make the following regulations:

1. (1) These Regulations may be cited as the Income Tax (Employments) Regulations 2003.

(2) These Regulations come into operation on 1 January 2004.

2. In these Regulations, “Principal Regulations” means the Income Tax (Employments (Consolidated) Regulations 2001 ( S.I. No. 559 of 2001 ).

3. The Principal Regulations are amended—

(a)      in Regulation 2—

(i)  in paragraph (1)—

(I)   by inserting the following after the definition of “inspector” —

“‘notional payment’ has the meaning assigned to it by subsection (2) of section 985A (inserted by the Finance Act 2003 ) of the Act; and

(II)       by substituting the following for the definitions of “temporary tax deduction form” and “total net tax deducted”:

“ ‘temporary tax deduction form’ means any form as may be prescribed on which particulars of emoluments paid and the aggregate of —

(i)  tax deducted from those emoluments and,

(ii) tax which was not so deducted, but which was remitted by the employer under section 985A(4) of the Principal Act in relation to notional payments,

are to be recorded by the employer pending receipt of a tax deduction card;

‘total net tax deducted’ means, in relation to the emoluments paid to any employee during any period, the aggregate of —

(i)  the total tax deducted from those emoluments, and

(ii)  tax which was not so deducted but which was remitted by the employer for that period under section 985A(4) of the Principal Act in relation to notional payments,

less any tax repaid to the employee;”, and

(ii)  by inserting the following after paragraph (1)—

“(1A) In these Regulations, except where the context otherwise requires —

(a)  references to a payment of emoluments shall include references to notional payments in respect of emoluments and

(b)  references to tax deducted or to be deducted, or to a requirement to deduct tax, from a payment of emoluments shall include references to —

(i) tax deducted or to be deducted, or to a requirement to deduct tax, from the payment, and

(ii) tax remitted or to be remitted, or a requirement to remit tax, under section 985A(4) of the Principal Act,

in respect of notional payments, as the circumstances may require,

and cognate words shall be construed accordingly.”,

(b)      by inserting the following after Regulation 16—

(c)      by inserting the following after Regulation 17—

(d)      in Regulation 28—

(i) by substituting the following for paragraph (1) —

“(1) Within 14 days from the end of every income tax month the employer shall remit to the Collector-General the total of —

(a)   all amounts of tax which the employer was liable under these regulations to deduct from emoluments paid by the employer during that income tax month, and

(b)   any amount of tax that was not so deducted but which the employer was liable, in accordance with section 985A(4) of the Act, to remit, in respect of that income tax month, to the Collector-General in respect of notional payments made by the employer,

reduced by any amounts which the employer was liable under these Regulations to repay during that income tax month.”, and

(ii) by substituting the following for paragraphs (3) and (4):

“(3) If the amount which the employer is liable to remit to the Collector-General under paragraph (1) of this Regulation exceeds the amount of the total net tax deducted in relation to emoluments paid by the employer during the relevant income tax month, the Revenue Commissioners, on being satisfied that the employer took reasonable care to comply with the provisions of Chapter 4 of Part 42 of the Principal Act and these Regulations and that the under-deduction was due to an error made in good faith, may direct that the amount of the excess shall be recovered from the employee, and where they so direct, the employer shall not be liable to remit the amount of the excess to the Collector-General.

(4) If the amount which the employer is liable to remit to the Collector-General under paragraph (1) of this Regulation exceeds the amount of the total net tax deducted in relation to emoluments paid by the employer during the relevant income tax month and the Revenue Commissioners are of the opinion that an employee has received his or her emoluments knowing that the employer has wilfully failed to either deduct therefrom or to remit in respect thereof in accordance with section 985A(4) of the Principal Act an amount of tax which the employer was liable to deduct or so remit under these Regulations, the Revenue Commissioners may direct that the amount of the excess shall be recovered from the employee, and where they so direct, the employer shall not be liable to remit the amount of the excess to the Collector-General.”,

(e)      in Regulation 29, by substituting the following for paragraph (1) —

“(1) Notwithstanding the provisions of Regulation 28, the Collector-General may, from time to time, authorise, in writing, an employer (unless the employer objects) to remit to him or her within 14 days from the end of a period longer than an income tax month but not exceeding a year (which in this Regulation and in Regulation 30 is referred to as the ‘accounting period’) the total of—

(a)   all amounts of tax which the employer was liable under these regulations to deduct from emoluments paid by the employer during that accounting period, and

(b)   any amount of tax that was not so deducted but which the employer was liable, in accordance with section 985A(4) of the Act, to remit, in respect of that accounting period, to the Collector-General in respect of notional payments made by the employer,

reduced by any amounts which the employer was liable under these Regulations to repay during that accounting period.”,

(f)      in Regulation 31 (1) —

(i)      by substituting the following for paragraph (a) —

“(a) in such form as the Revenue Commissioners may approve or prescribe a return in respect of each employee showing the total amount of the emoluments, including emoluments in the form of notional payments paid by the employer to or on behalf of the employee during the year and the total net tax deducted from the emoluments,”, and

(ii)      by substituting the following for paragraph (d) —

“(d) a statement, declaration and certificate in the prescribed form showing-

(i)     the total amount of notional payments paid by the employer to or on behalf of every employee during the year, and

(ii)    the total net tax deducted or repaid by the employer in respect of every employee during the year.”,

(g)      in Regulation 32, by substituting the following for paragraph (1) —

“(1) Upon request made to him or her at any premises of an employer by an authorised officer, any person, being the employer or a person employed by the employer at the premises, shall produce to the authorised officer for inspection all wages sheets, certificates of tax credits and standard rate cut-off point, tax deduction cards, and other documents and records whatsoever relating to the calculation or payment of the emoluments, including notional payments, of employees of the employer or the deduction of tax from, or the remittance of tax under section 985A(4) of the Principal Act in respect of, such emoluments as may be in that person's powers, possession or procurement.”,

and

(h)      in Regulation 41—

(i)  in paragraph (b) by deleting “or” after “Schedule E,”,

(ii)  in paragraph (c) by substituting “paid, or” for “paid.”, and

(iii)  by inserting the following after subparagraph (c):

“(d) by virtue of section 787 of the Act, to be deducted from or set off against the employee's relevant earnings (within the meaning of section 783 of the Act) for the year of assessment in which it is paid.”.

Explanatory Note.

(This note is not part of the instrument and does not purport to be a legal interpretation)

These Regulations amend the existing regulatory provisions which prescribe the manner in which the tax is to be deducted from salaries and wages and accounted for to the Revenue Commissioners under the “Pay As You Earn” system.

Section 6 of the Finance Act 2003 (No. 3 of 2003) extended, with effect from 1 January 2004, the PAYE system to non-cash remuneration of employees in the form of perquisites and other benefits. The tax due is to be determined by reference to a notional payment and is to be deducted from actual money wages/salary paid in the same pay period as the benefits are provided. Where there is insufficient money wages/salary from which to deduct tax due in respect of notional payments, the employer must, nevertheless, remit the full amount of tax due to the Revenue Commissioners. Where any amount remitted, but not deducted, by the employer is not reimbursed to the employer by the employee by the end of the tax year the employee is liable to tax in the following year in respect of a benefit equal to the amount of tax paid by the employer and not made good by the employee.

Section 14 of the Finance Act 2003 contained enabling provisions for the Revenue Commissioners to extend the “net pay” arrangements to qualifying premiums payable under Retirement Annuity Contracts (RAC's). Under those arrangements employers will calculate PAYE (and PRSI) after deducting the amount of qualifying premium from gross pay.

The Regulations make the necessary changes to the existing PAYE Regulations so that they will apply to tax to be deducted or remitted in respect of notional payments. The main changes are contained in Regulation 3 which provides—

(i)  that the obligation on an employer to deduct tax in respect of notional payments is to have effect as 1n obligation on the employer to deduct the tax from actual payments of money wages/salary made at the same time or at the next pay day (paragraph (b)),

(ii)  that where, because of an insufficiency of actual payment, an employer is unable to deduct the full amount of tax on notional payments and must, nevertheless remit the balance of tax due, the amount not deducted is to be remitted as if it had been deducted under this Regulation. This is to ensure that the employer will be obliged to remit at the same time to Revenue both tax actually deducted in respect of a notional payment and the balance of tax due in respect of that payment (paragraph (b)),

(iii)  that, where an employee is chargeable to tax for a year (‘the following year’)   in respect of a benefit because he or she has not made good to the employer a balance of tax remitted, but not deducted, in respect of a benefit for the previous year, that benefit is to be treated as having been provided on 31 March in that following year (paragraph (b)),

(iv) the tax in respect of certain ongoing benefits in a tax year i.e.

(a)      of the private use of a car

(b)      of the private use of a van

(c)      arising from a preferential loan and

(d)      arising from an asset which belongs to the employer,

is to be apportioned over the period of the tax year for which the benefit is available (paragraph (c)),

(v) that tax deducted or to be remitted in respect of notional payments is to be paid over to the Collector-General at the same time as tax deducted from actual payments made in the same pay period (paragraph (d)),

(vi) that where, because—

(I) of a genuine error by the employer or

(II) wilful failure on behalf of the employer which the employee was aware of,

the tax actually deducted or remitted in respect of notional payments is less than the amount that the employer was liable to pay to the Collector-General, the Revenue may direct that the excess can be collected from the employee (paragraph (d)),

(vii) that appropriate details of notional payments must be included on Form P35 (End of Year Return) (paragraph (f)),

(viii) that an employer on request by an authorised office will produce all records and documents relating to the calculation or payment of an employee's notional payments, and to the deduction of tax or the remittance of tax in respect of those payments, as may be in the employer's powers, possession or procurement (paragraph (g)),

and

(ix) the “net pay” arrangements are extended to cover qualifying premiums payable under retirement annuity contracts (RAC's) (paragraph(h)),