Pre year-end checklist for Employers
Employment Tax Update, Winter 2012
As we move closer to the year-end PAYE/PRSI/USC deadline, it is a good time for employers to review their records in order to ensure that they avoid the post year-end rush. We have set out below some areas that employers should focus on pre year-end.
Benefits in Kind (BIK’s)
Almost all BIK’s provided to employees should be processed through the payroll. Revenue acknowledge that in certain cases the employer will not be able to assess the value of the BIK at the start of the tax year and in these cases PAYE,PRSI and USC should be calculated using the best estimate. However, Revenue do expect employers to review their estimates prior to year end, in order to ensure that they are correct. The valuation of BIK’s is an area that Revenue will focus on during any PAYE audit and therefore employers should review their position.
One specific area that employers should focus on is with regards to the calculation of the BIK on company cars. BIK should be assessed at a rate of 30% on the original market value of the car. This can be reduced in cases where an employee travels in excess of 24,135 business Kilometers in a year. Employers need to be able to demonstrate to Revenue that they have adequate controls in place to calculate their employees business travel.
Another area to consider is the use of the € 250 small benefits exemption. Employers should try to ensure that this tax exemption is availed of. They also need to ensure that it is only availed of once, and that the tax-exempt benefit is delivered to employees in a single transaction.
Small and Irregular Benefits Election
In order to allow for ease of administration, there are provisions which allow employers to elect to account for PAYE/USC/PRSI due on certain small benefits provided to employees on an off payroll basis. These provisions can be of particular benefit where employers do not wish to associate a monetary value to an award/gifts which they have made to employees during the course of the year. In order to avail of these provisions an election must be made to Revenue within a set time frame.
Since 2011, the onus around the taxation of most equity awards has shifted to the employer, with the majority of transactions (option exercises being the main exemption) being subject to PAYE/USC/PRSI through the payroll.
Employers need to ensure that they have adequate procedures in place to ensure that they are being notified of equity transactions which give rise to a PAYE/PRSI/USC withholding obligation as they occur so that they are correctly processed through the payroll, where required.
All share transactions, should be reported on the employers Form RSS1 by 31 March of the following year.
For Employees Working Outside Ireland (Outbound)
For out-bound employees, employers should ensure that all the required documents are in place at the year-end to minimise their withholding obligations (e.g. PAYE exclusion orders, social security applications etc.) and that payroll is operating in line with whatever documentation is in place for the employees.
For Foreign Employees Working in Ireland (Inbound)
For inbound employees that remain on their home country contracts of employment and are on a shadow payroll (PAYE is accounted for but no actual salary is delivered) in Ireland, a review should be carried out at the year-end in order to ensure that payroll is operating correctly.
An inbound employee on a foreign contract of employment may only be taxable in Ireland on their Irish workdays. Employers should review the position for these individuals to ensure that relief has been given for non-Irish workdays. Inbound assignees may also qualify for travel and subsistence relief providing certain conditions are met. Employers should ensure that this relief is claimed where possible.
Employers should also review their inbound population to determine if any of their employees qualify for the Special Assignee Relief Program (SARP).
Short Term Business Travellers (STBT’s) into Ireland
STBT’s should be reviewed to ensure that the necessary dispensations have been applied for. Monitoring STBT’s is something that employers find quite difficult. Employers may be asked for complete calendars setting out details of any Irish workdays for STBT as part of any Revenue audit. Accordingly record keeping is vital.
How Deloitte can help
If you would be interested in hearing more about how Deloitte can assist your organisation with minimising tax risk, to identify cost control or process improvements, to resolve potential compliance issues or employee communications please contact:
+ 353 1 417 2406