Covid 19 and Director Taxes

We would like to make you aware of the following issues which arise around directors’ taxes and Covid 19:

Employers paying employees’ 2020 tax liability
Revenue have given a concession whereby an employer can pay the temporary wage subsidy scheme (TWSS) tax liability on behalf of an employee, where no benefit-in-kind tax implications arise for the employee. Directors can also avail of this concession.

However, the closing date for availing of the concession is 30th June 2021. Further details are available on Revenue’s website here.

Please also read the next sections as they are relevant to your 2020 income tax return. Our accountancy body is actively consulting with Revenue on the following matters. The default status is described below:

Spreading of tax due on TWSS and Pandemic Unemployment Payments (PUP) over 4 Years
Presently, Revenue is spreading the above liabilities for PAYE workers over 4 years, however there is no similar concession for directors that are required to file an income tax return. Consequently, directors will be assessed on the full liability on their 2020 income tax return, and will have to contact Revenue in cases of inability to pay.

Deduction for payroll taxes on director’s income tax return
In order to avoid abuse of the PAYE system by self-employed directors, they are only allowed to deduct income tax (PAYE) paid to Revenue on their income tax return, rather than income tax (PAYE) deducted on their payslip. Where there are taxes unpaid, Revenue will consider that it is the tax due on directors’ salaries which are last remitted by the employer to Revenue. This has implications for any companies availing of the Covid 19 debt warehousing scheme, as in these cases we will only be able to deduct PAYE paid on the director’s income tax return. This will create a temporary personal income tax liability, until the company remits to Revenue its 2020 payroll taxes in full.