The tax landscape is quickly evolving in response to Covid-19. To date the Revenue Commissioners have issued several advisory updates in relation to individuals. These deal with:-
- The calculation of residence,
- Tax-free payments to employees working from home,
- BIK charges on company cars,
- Tax relief for emergency travel,,
- Relieving measures for temporary assignees and business travellers,
- A relaxation in conditions for claiming transborder relief,
- Relief for individuals claiming SARP and individuals operating under "PAYE" exclusion orders.
Obviously, restrictions on travel caused by Covid-19 are impacting individuals that communte in and out of Ireland.
This impacts the resident status of many individuals who may acquire exposure to Irish tax on income sources normally subject to limited or no tax. Apart from income tax, the restriction on movement may have longer lasting impact for CGT and gift and inheritance tax exposures.
Revenue guidance provides relief where a person is prevented from leaving Ireland due to extraordinary natural occurrences (e.g. severe adverse weather conditions).
Initial indications are that Revenue will consider relief for any person impacted in this way by Covid-19. We anticipate significant difficulties in this area.
As a result of COVID-19, a large number of employees are working from home.
Revenue historically had guidance which provided tax relief for “e-workers", i.e. individuals, both part-time and full-time, required to work at home.
The Revenue Commissioners have confirmed that this scheme is extended to employees required to work at home during Covid-19. Individuals may therefore make use of the scheme to claim for additional costs incurred in the performance of their employment duties while working from home.
Individuals with company cars potentially face exposure to income tax even though restrictions on travel exist.
To alleviate the tax burden on employees, the Revenue Commissioners have announced that BIK will be relaxed in certain circumstances. They are:-
- The employee has no access to the company car,
- The employee has access but private use is prohibited and the vehicle is not used, or
- Any other situation where the individual has limited or reduced business mileage and personal use is also limited.
Where the employee continues to have a company car, albeit with reduced mileage, liability to income tax, PRSI and USC is calculated using hypothetical business mileage. The benchmark for this hypothetical mileage calculation is the business mileage travelled in January 2020.
Some employers have funded the cost of holiday/flight cancellations for employees or incurred costs assisting employees returning to Ireland including costs related to family members.
These flights will have no BIK implications provided that the costs incurred are reasonable, the employee is integral to the business and is required to return to deal with issues related to Covid-19.
The BIK exemption applies also to costs related to the employee’s family.
Irish payroll obligations can arise where an individual carries on the duties of a foreign employment in Ireland.
Where an individual spends more than 60 workdays but less than 183 days in Ireland and certain treaty conditions are met, an application can be made for an exemption from Irish payroll withholding. The application must be made within 30 days of the date that the individual takes up duties in Ireland.
Revenue have confirmed that they will not strictly enforce the 30 day notification requirement given the unprecedented consequences of Covid-19.
Transborder Relief is a vital for Irish resident and domiciled individuals who commute daily or weekly to employments typically in Northern Ireland/UK or mainland Europe.
The relief exempts a portion of income from exposure to Irish tax and instead the person only pays tax in respect of the employment in the country in which they are working.
A qualifying condition for transborder relief is that the person has no more than 30 'incidental' workdays in Ireland in a tax year.
Revenue have advised that days spent working in Ireland due to Covid-19 will not be counted against individuals who otherwise qualify for relief.
Revenue have temporarily agreed to extend the application process to 150 days to submit the necssary SARP application. Revenue may extend the deadline even further in exceptional circumstances.
Individuals on assignment abroad and exempt from Irish income tax under a PAYE exclusion order may breach the allowed "30 work day" limit in Ireland.
The Revenue guidance confirms that an employee who currently has an exclusion order and may be required to work in Ireland for more than 30 days due to Covid-19 will not be adversely impacted.