Twss income tax liability

R

Rooster12

Registered User
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Hi all,

My employer has been paying me using the twss. Initially there was a risk to the business but after the second month it was clear the business was bouncing back. We have not shut as a result of covid. We have been hit no more than any other business. Were still going to meet turnover targets. They continued to avail of twss until august.

My problem is that I am now liable for the tax associated with a large twss bill. I estimate it's going to be 3.5k. I really don't think the company needed this to the extent it claimed. Its very frustrating as I had no control or choice on this but have to pick up the bill.

I appreciate that this is the harsh reality. But im interested to know if there are others in the same boat as me or has anyone come to a arrangement with a employer to cover this cost (via. "Bonus/pay rise")

I understand why they have claimed. It's good business.
I have looked into the revenue rules and see that they have been revised a couple times. From my readings they initially seemed to rely on good faith or that a business reasonably expected a 25% dip in revenue. Sure most businesses can meet that low bar....
 
Well you got the payments without tax being deducted, presumably so why are you complaining about a delayed tax bill?
 
My understanding is that you are no worse off with TWSS/EWSS it's just that you have to pay the tax instead of your employer, so pay rises or bonuses shouldn't come into it.
I was sure I'd seen some report that Revenue will likely just decrease tax credits over the next couple of years rather than seek cash now but can't seem to find it.
 
Here it is;

https://www.revenue.ie/en/corporate...evenue-update-on-ewss-sweepback-payments.aspx

Outlining Revenue’s approach to collecting income tax and USC liabilities if they arise, Mr Rigney concluded:
“Employees will be given the opportunity to fully or partially pay any income tax and USC liability through the Payments/Repayments facility in myAccount. Otherwise, Revenue will collect the liability, interest free, by reducing the employees tax credits over 4 years to minimise any hardship. The reduction of tax credits will start in January 2022.”
 
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dereko1969 said:
My understanding is that you are no worse off with TWSS/EWSS it's just that you have to pay the tax instead of your employer, so pay rises or bonuses shouldn't come into it.
I was sure I'd seen some report that Revenue will likely just decrease tax credits over the next couple of years rather than seek cash now but can't seem to find it.
Click to expand...
A lot of people will be worse off under the TWSS

eg - suppose an employee earns a gross salary of €48K (€4k per month), take-home would normally be roughly €3k per month after taxes

If their employer availed of the TWSS then the max that could be paid under the TWSS was €1,516.67 per month (€350 per week)

If the employer decided to top-up the TWSS so that the employee was not out of pocket then they would have topped up by €1,483.33, minimal (if any) tax would have been paid on this €1,483.33 so the employee's take-home is still around the €3k mark for the month

By the end of the year the employee will have taxable earnings of €43k as follows

Jan-Mar €12k (€4k salary per month x 3 months)
Apr-Aug €15k (TWSS of €1,516.67 plus top-up of €1,483.33 per month = €3k per month x 5 months)
Sep-Dec €16k (€4k salary per month x 4 months)

Crucially though those earnings of €43k includes TWSS earnings of €7,416.65 which they have not paid any tax on.

As all of the employee's 20% band and all of their tax credits etc have been used up, that €7,416.65 is taxable at 48.5% which is a tax bill of €3,597

I suspect that there are thousands of employees out there who don't realise this is coming down the road
 
And if you take a married couple who were both paid the TWSS you can double that tax bill to over €7K
 
So their take home pay was higher than normal and nobody noticed?

Eh?
 
There are other issues here to consider

- The employer has to be down a min of 25% in turnover, which is a lot
- The alternative was for the employer to lay the employee off where they would have gotten only €1,516.67 on the PUP
 
If their pay was made up to the normal gross level by the employer and tax was not deducted on the TWSS portion, then their take home pay would have been higher than normal
 
jpd said:
If their pay was made up to the normal gross level by the employer and tax was not deducted on the TWSS portion, then their take home pay would have been higher than normal
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Do you understand how the TWSS works?

Their TAKE-HOME pay is brought up to the normal level via the top-up, not their TAXABLE pay
 
Thanks all, particularly DB72. That is the conclusion I came to also.

I read previously that that the twss doesn't mean the employer can pay you less than they are contracted to. Could you argue that by a availing of the twss they havent stuck to this contract l. the employee is out of pocket as a result of their action.

Therefore, They would need to gross up the 3.5k and pay you that to ensure you are not out of pocket (and in a worse position than you would have reasonably expected under your employment contract)

..is this a flawed argument?
 
So going on DB74 example above is it not the case that as the employer has only topped up to the net pay (3k) and not gross pay (4k) it is essentially a pay cut because employee is no better or worse off for these months in real time but has this tax bill o/s. So when this has to be paid to revenue their take home pay over these months is reduced.

Or, to look at it another way, the reduction from 4k to 3k is the tax bill which the employer has taken at source, by only topping up to take home pay (Net 3k), as they would with the tax liability in normal times for PAYE.
Surely in this case the employer should be paying revenue for this o/s bill as they have only paid the employee (via top up and TWSS) a reduced amount? Is this deduction the tax now due to revenue which is falling to the employee to pay from the 3K but should be paid by employer as they took it from the gross by reducing from 4k to 3k?

Sorry for convoluted question but this has been bouncing around my head for quite a few months now without being able to resolve it myself.
 
I can see where Rooster is coming from. My company availed for TWSS from April to Aug inclusive. My take home pay in those 5 months (averaged out) at an increase of €466 more than what I should usually have received. However, I have a Revenue bill of €1090. In effect, I am ending up having to pay Revenue the difference of €624 that I shouldn't normally have had to pay - so going on TWSS has cost me €624. I do appreciate I kept my job and I have four years to pay it back, but I just don't understand how it works out that way.
 
DB74 said:
If the employer decided to top-up the TWSS so that the employee was not out of pocket then they would have topped up by €1,483.33, minimal (if any) tax would have been paid on this €1,483.33 so the employee's take-home is still around the €3k mark for the month
Click to expand...

I don't know TWSS so I could easily be wrong here but isn't the issue that, in this example, the employee was only partially topped up? So in this example they still took a 5,000 pay cut (even after TWSS topup). It just didn't look like a pay cut as the tax due from Apr-Aug wasn't paid. In this case the pay cut is equal to the amount of outstanding tax due to Revenue.
 
Hi all.

Looks like the bomb dropped on employees this month...

I think all you can do now is look at your situation and see if it's appropriate and fair to negotiate the bill with your employer.

It's simple in my eyes: Your gross pay + twss does not equal the gross salary that your employer agreed to pay you.

It's interesting that the revenue has clarified that employer can pay the employee's tax bill without having to pay BIK or gross up That at least reduces the number that you have to negotiate, if you feel your company has actually done ok in 2020, and you have a good case.

I don't think any employee will tackle their employer if they had a terrible year and revenue dropped by the 25% level. But I do think (opinion!) there arere alot of companies out there that didn't, and could easily manage around the 25% rule... on paper..being shrewd businessmen they drove a bus through the opportunity!...I would have done the same!

Thanks for all your input.
 
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