The Temporary Wage Subsidy Scheme (TWSS) further guidance

The Temporary Wage Subsidy Scheme (TWSS) has been extended to 31 August 2020. Our previous guidance on the TWSS is available here. Revenue recently issued an e-brief covering the extension of the scheme and other developments including details of Revenue’s TWSS compliance programme.

Further details are available below:

TWSS Compliance programme

Revenue announced a compliance programme which introduces checks by Revenue for all employers who availed of the scheme to confirm that:

  • They meet the eligibility criteria;
  • Employees are receiving the correct subsidy amount; and
  • The subsidy amount is being correctly recorded in employees’ payslips.

The compliance checks will issue via a letter through MyEnquiries on Revenue’s Online System (ROS).

Employers should be aware that Revenue have stated that the compliance programme will provide employers with an opportunity to address any identified issues in respect of the operation of real time reporting under PAYE Modernisation in 2019 and 2020 to date and other outstanding issues.

While Revenue have verbally indicated that the TWSS review itself is not a formal compliance intervention, the introduction of other issues will require employers to consider all potential tax issues carefully to determine if there is a compliance matter that requires a formal disclosure to Revenue under the Revenue’s Code of Practice for Revenue Audit and other Compliance Interventions.

Also, it is vital that employers, who intend to avail of the recently introduced “debt warehousing” scheme for PAYE and VAT liabilities incurred during the COVID-19 pandemic, ensure that their tax affairs are in order as up-to-date compliance is a pre-requisite of the scheme. Further details on the debt warehousing scheme is available here.

Extension of TWSS – employer eligibility

Revenue confirmed that the employer eligibility criteria to continue participating in the scheme or to now join the scheme remains unchanged i.e. business is adversely affected by COVID-19 with a minimum of a 25% reduction in turnover, customer orders or any other reasonable basis in quarter 2 2020 and employer has an inability to pay normal wages and outgoings. Revenue outlined that if a business did not meet the eligibility criteria but had reasonable grounds for assuming it would, it should immediately cease claiming TWSS. Revenue have indicated that once the original basis for claiming the subsidy was reasonable, they will not seek to claw back the subsidy previously claimed.

Extension of TWSS – week 1/month 1 basis

There is no change to the subsidy rates for employees for the extended period. While the subsidy is not taxed through payroll, the subsidy is ultimately taxable and the tax due for each employee will be calculated at the year-end. As the subsidy payment is not taxed through payroll, refunds of tax paid in prior periods may be triggered through payroll. The Pandemic Unemployment Payment (PUP) will also be subject to income tax at year-end. With the extension of the TWSS, Revenue have placed all employees who received TWSS or PUP payments on a week 1/month 1 basis with effect from 21 June 2020. While many employees have received tax refunds since the start of the scheme, this will assist in minimising future potential tax liabilities at the year-end reconciliation.

Employers should ensure that they are using the most up to date Revenue Payroll Notification (RPN) when running payroll.

Employees returning to work following maternity, other related leave, illness other benefits and apprentices

Employees on maternity leave, adoptive leave, paternity leave, parental and other related leave or in receipt of health and safety benefit, parent’s benefit or illness benefit can now qualify for TWSS even if they were not on the employer's payroll on 29 February 2020. Also, apprentices who were not on their payroll in January/February 2020 because they were on block release for class based training are now eligible for TWSS.

Employers who want to access this scheme on behalf of employees covered by these changes can complete a short online form available through My Enquiries on ROS.

The changes will apply from 26 March 2020, the date of employee’s return to employment or the date the employer was registered for the scheme, whichever is the latest.

Deloitte’s view

The extension of and enhancements to the TWSS is very welcome and a much needed support for businesses during the current pandemic and economic crisis.

While Revenue had previously indicated that reviews of the TWSS will take place at the end of the scheme, we understand the compliance check letters will issue in the coming weeks. The introduction of the compliance programme at this stage will be an administrative burden for employers as they re-open their businesses and deal with other COVID-19 related issues. It is important that employers respond promptly to these letters as failure to do so may lead to suspension of future TWSS payments.

In addition, employers are required to proactively review whether they are still eligible for the scheme and cease any claims where they find they either are no longer entitled or indeed they never qualified for the TWSS. This needs to be done promptly to ensure they do not claim payments they are not entitled to.

Given the compliance checks also address other tax issues, to include the wider operation of payroll taxes, we would recommend employers undertake a tax health check in advance of responding to Revenue in order to mitigate any further queries or potential exposure to statutory interest and tax geared penalties. This compliance programme will be a key part of Revenue’s audit/intervention programme for the foreseeable future and in many instances be a stepping stone to the identification of other tax considerations.

Please discuss this matter in more detail with Deloitte’s Global Employer Services team who specialise in this area or your usual Deloitte contact.

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