Employment Tax and Law - Quarterly newsletter

Employment Tax Updates

1. Enhanced Reporting Requirements (ERR)

From 1 January 2024 employers have an obligation to register for and comply with the new Enhanced Reporting Requirements (“ERR”) in respect of certain ‘reportable benefits’ provided to employees and directors. EY issued an Alert in September 2023 on the proposed requirements which can be found in this link.

What is to be reported?

ERR will apply to the following types of payments:

• Payments to employees of the remote working daily allowance of €3.20
  
• Provision of small benefits to employees availing of the Small Benefit Exemption
• Payments to employees for travel and subsistence which are treated as tax free

When?

Employers will be required to report the details of these non-taxable benefits ‘on or before’ making the payment or the provision of reportable benefits to the employee/director.

Some employers may not have a set date each month in which expenses are reimbursed to employees/directors and arrange for the reimbursement as and when the expense claim is submitted. To comply with ERR these employers will have multiple reporting obligations throughout a single month and may need to review their expense policy and processes to manage ERR reporting obligations.

Due to concerns raised in the stakeholder engagement with Revenue last year, Revenue released a publication in December confirming that appropriate time will be allowed for employers to fully integrate compliance with the ERR provisions into their business processes. Revenue confirmed this period will be in place up to 30 June 2024 where support will be provided to employers to comply with their reporting obligation and Revenue will not operate any compliance programmes nor seek to apply any penalties for non-compliance. This gives employers the opportunity to work with key stakeholders and upskill staff while updating their payroll and expense systems and processes.

Recent updates

Revenue have issued a Tax and Duty Manual and Frequently Asked Questions (FAQ’s) document to provide further information and anticipate questions which may be raised by employers.

If you are struggling with the ERR requirements, at the request of clients, EY has developed a managed ERR service where EY will work with employers to gather client data and use advanced analytics tools for data management tasks like merging, classifying, and cleansing expense and benefit data. The output is reviewed by a data analyst and tax specialists, ensuring accuracy and compliance. The final output is uploaded to Revenue's ERR facility on ROS.

2. Special Assignee Relief Programme (SARP)

The Special Assignee Relief Programme (“SARP”) is a tax relief scheme for certain employees who are assigned or transferred to work in Ireland from abroad by a relevant employer. The scheme applies to qualifying employees on assignment and employees transferring to work in Ireland during any of the tax years 2012 to 2025. The aim of SARP is to attract key talent and skills to Ireland and enhance its competitiveness as a location for foreign direct investment. To apply for SARP, the employer must submit a Form SARP 1A to Revenue within 90 days of the employee’s arrival in Ireland to perform the duties of his or her employment here. 

What has changed?

Revenue launched a new eSARP Portal on ROS on 1 January 2024. From this date all Form SARP 1A applications and Employer SARP Tax Returns must be completed online and submitted to Revenue through the portal. Employers and/or their agents will be required to register for the Global Mobility function on ROS to access the eSARP portal.

eForm SARP 1A applications

The information required to complete the eForm SARP 1A application has not changed from prior years, however, the following should be noted in light of a recent Tax Appeals Commission case. If a PPS number is not available the eForm SARP 1A can be completed and submitted without a PPS number, however Revenue will not consider the application to be certified by the employer in line with the tax legislation. If the application is not certified by the employer within 90 days of the individual arriving to Ireland, the application will be considered invalid by Revenue and individual will be unable to avail of SARP.

Where the eForm SARP 1A application has been submitted through the portal, a record of the submission and the status (pending or complete) will be available to view in the portal by the employer and agent.

2023 Employer SARP Tax Return

An Employer SARP Tax Return must also be prepared and submitted through the portal. Revenue have confirmed that they will pre-populate the Employer SARP Tax Return which will be available for employers to review. However, only five fields, such as the employee name, PPSN, nationality, country the employee was previously present in and job title will be populated, employers will still be required to gather and include compensation details and other information relevant for the return. 

The deadline for filing the SARP Employer Return for the period 1 January 2023 to 31 December 2023 is 23 February 2024.

Calculation of SARP in tax equalised cases

Following a second Tax Appeals Commission decision recently, Revenue updated their guidance in late December advising taxpayers that in the case of tax equalised employees, the identified net income received by the employee should be regrossed for Irish tax purposes ignoring SARP relief, i.e., at the marginal rate of tax of 52%. SARP can then be applied to the regrossed value of remuneration, and the Irish tax applied as per the Relevant Payment Notification (RPN).

This is not in line with general practice for prior years and Revenue has confirmed the earlier periods will not need to be re-opened and amended. However, given the change in practice and the financial impact on employers, EY will be engaging with Revenue to discuss the new method of regrossing and technical basis to support the prior methodology as being correct and appropriate.

3. Employer registrations on ROS

Due to the introduction of ERR and the SARP ePortal, Revenue have released new employer registrations relevant for payroll taxes, ERR and SARP for ROS. Employers must ensure that they have completed the correct registrations with Revenue for ROS for 2024. If any services are outsourced to external providers, employers must work with their tax agents and/or external payroll providers to ensure the agents also have the correct agent link in place for 2024.

The following employer registrations will be in place for 2024:

1. Payroll Registrations
2. Global Mobility Registration for SARP
3. ERR registration

Where an employer has outsourced the ERR reporting obligations to an external party, Revenue have created an Employer’s PAYE / PRSI – ERR Agent registration which the external party must have in place to prepare and submit the ERR submissions to Revenue on behalf of the employer. This registration is relevant where the employer has engaged two separate providers for payroll services and ERR services.

4. Share Scheme Consultation

The Department of Finance launched its public “Consultation on Ireland’s Taxation of Share Based Remuneration” on 5 December 2023. The consultation aims to gather views and experiences from all stakeholders regarding the Irish share plan landscape. Submissions are welcome from all interested parties. The consultation is very wide ranging and seeks to explore a vast array of topics.

EY will be making a submission to the Department of Finance to convey, both our views and the views/feedback from our clients regarding share plan challenges and opportunities in Ireland.

The consultation provides a unique platform to ensure the operation of share-based remuneration plans in Ireland remain competitive, in terms of attracting FDI and top talent.

Furthermore, it opens the door for dialogue regarding what can be done in the SME space to broaden the options available to such companies looking to introduce share plans for their employees. Our submission will seek to address some of the challenges our SME clients face when introducing such plans.

5. Share Options and PAYE

From 1 January 2024, a gain arising from the exercise, release or assignment of a share option will be reportable through the PAYE system by the employer who must make the appropriate deductions. Prior to 1 January 2024, the responsibility for the payment and reporting of the Irish taxes due on any gain arising from the exercise of a share option fell on the employee. This required the individual to report and settle the taxes by filing a Form Relevant Tax on Share Options (RTSO)1 within 30 days of the exercise.

Revenue have not yet released an updated Tax and Duty manual outlining the practical considerations in operating payroll tax withholding in respect of a share option gain. However, consultation with Revenue in relation to FA2023 has provided some insights. 

It is expected that employers must include the relevant details of the gain and taxes due in the same manner as other share-based remuneration as a notional payment in the payroll tax return. Revenue have also indicated that employers may be able to rely on existing legislation for other share-based remuneration to allow the sale of sufficient shares arising from the exercise to fund the tax liability collected through the PAYE system. Further details will be provided once the updated guidance is released from Revenue. 

6. Share Scheme Reporting

A reminder that the filing deadline for the Form ESA, Form RSS1 and other share-related returns for the 2023 tax year is 31 March 2024. Employers have an obligation to file the relevant return(s) to be complaint. Failure to make a return where required to do so may result in penalties.

What needs to be reported

a) Form RSS1

The Form RSS1 applies to unapproved share options. Employers must file a Form RSS1 for the 2023 tax year where any share options were granted, exercised, assigned, or released during 2023.

b) Form ESA

The Form ESA applies to all types of share awards not required to be reported through the Form RSS1 or any of the other share-related returns.

7. Civil service rates updates

The updated civil service subsistence rates for business travel within the State came into effect from 14 December 2023. The previous civil service subsistence rates were in place from 1 September 2022, and it is welcome news that the rates were increased due to the increase of costs generally.

Overnight allowance

• The normal rate increased by €28 from €167 to €195.
  
• The reduced rate increased by €25.20 from €150.30 to €175.50.
• The detention rate increased by €14 from €83.50 to €97.50

The vouched accommodation domestic subsistence rate (for use in Dublin only) also increased. The employer can provide/ reimburse the vouched cost of accommodation up to €195 plus meals in the amount of €42.99. The employee must be at least 100km from their home and normal place of work to qualify for the above payments.

Day allowance

The day allowance for business travel where the employee is away from their normal place of work for ten hours or more increased by nearly €4 from €39.08 to €42.99. The day allowance for business travel where the employee is away from their normal place of work between five and ten hours increased by €1.63 from €16.29 to €17.92. The employee must be more than 8km away from their home and normal place of work to qualify for the above payments.

8. Payments to former employer – recent ebrief

Revenue in eBrief No. 006/24 outlines that where a payment to former employees have been made the employer should deduct withholding taxes as per the latest Revenue Payroll Notification (RPN), if available. If a RPN is not available withholding taxes shall be deducted at the higher rate of tax i.e. 40% PAYE and 8% USC in 2024.

9. UK – P11Ds abolition

The UK government announced as part of it’s Tax simplification update that it will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind via payroll software from April 2026. This measure will bring it in line with the existing process in Ireland for payrolling of benefits in kind and will reduce the administrative burden for thousands of UK employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits. 

HMRC will engage with stakeholders to discuss the proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process.

Employment Law Updates

1. Statutory Sick Pay (SSP) 

Since 1 January 2024, all employees (full time, part time or temporary) qualify for 5 days of statutory sick leave per year. This increase is part of a 4-year plan which will see employees’ entitlements increase incrementally to 10 days statutory sick leave in 2026.

How does SSP work?

• Employees must:
  • Have 13-weeks’ service;
    
  • Submit a valid medical certificate from the first day’s absence
    
• SSP is calculated as 70% of an employee’s gross earnings up to a maximum of €110 per day.
  
• Employees may apply for Illness Benefit once SSP expires.
• Employers may put a more favourable sick leave pay policy in place.

2. Gender Pay Gap Reporting

From June 2024, employers with 150 or more employees will be required to report on their gender pay gap. Employers should use this time to understand the reporting obligations. Those reporting for the first time in 2024 should engage now with the right stakeholders.

3. Domestic Violence (DV) Leave

In November 2023, DV leave was introduced in Ireland. This provides employees with up to 5 days paid DV leave in any 12-month period. Employers should immediately update their employee policies to include a comprehensive DV leave policy.

How does DV leave work?

• All employees qualify – there is no minimum service requirement.
• Full pay applies to DV leave.
• Employees qualify for DV leave if they are victims of DV, but also if people closely connected to the employee are the victims of DV.
• DV leave is intended to support employees to avail of certain services, such as medical attention, counselling, legal advice or assistance from An Garda Siochana. 
• Employers are limited in the evidence that they can (or should) seek from employees who wish to use DV leave.
• Employers should carefully select managers to confidentially and sensitively manage requests for DV leave. It is important to remember that employees might seek DV leave after they have taken the time off from work.

4. Parent’s Leave

Parent’s leave will increase from 7 weeks to 9 weeks from August 2024.

Parent’s leave is different to parental leave. Parent’s leave is available to each parent of a child who is under 2 years of age. It can be taken in separate weeks or in one block of leave. Parent’s benefit is available to those who qualify based on PRSI contributions. The additional 2 weeks of Parent’s leave will apply to parents of children under the age of 2 in August 2024 (or who have been placed for adoption for less than 2 years in August 2024).

5. Spotlight on Protected Disclosures (Whistleblowing)

The Protected Disclosures Act 2014-2022 protects “workers” from “penalisation” if they speak up about “wrongdoing” in the workplace.

Since 17th December 2023, employers with more than 50 employees (in addition to all public bodies, private sector employers with more than 250 employer and other specific areas such as financial services) must operate an internal reporting channel for protected disclosures (PD).

The government published updated guidance on best practice to manage PDs in November 2023 for the public sector. This guidance serves as a tool to support private sector employers to comply with the onerous obligations under the amended legislation.

Compensation of up to 5 years’ pay is available to a worker who is penalised for making a PD. New criminal sanctions are also set out in the legislation. By way of example, it is an offence to fail to establish, maintain and operate an internal reporting channel. Similarly, it is an offence to breach the duty of confidentiality to the worker and anyone named in the worker’s report.

Steps to take:

• Prepare a PD policy setting out a clear procedure for making protected disclosures.
• Communicate the policy to all workers (not just employees).
• Nominate a “designated person” to receive and manage reports. A “designated person” should be impartial and should receive training to ensure they can competently manage PDs.
• Ensuring that measures are in place to maintain confidentiality from receipt to closure of a report (and beyond).
• Have appropriate policies in place to deal with any circumstances of penalisation.

Key changes introduced by the amended PD legislation:

• Acknowledgement: An organisation has 7 days from receipt of the PD to acknowledge receipt of the PD.
• Initial investigation: The designated person should complete an initial assessment of the PD to determine if it is a PD and what steps/action to take to address the PD.
• Confidentiality: The identity of the reporting person (worker) and any person named in the PD must be protected and remain confidential.
• Feedback: The worker must receive feedback within 3 months of receipt of the PD.
• Further feedback: The worker is entitled to seek ongoing further feedback at 3 monthly intervals under the procedure related to the PD is closed.
• Definition of “worker” - A “worker” now includes, shareholders, volunteers, trainees, members of the administration, management or supervisory body of an undertaking (e.g., board members) and those who are applying for jobs.
• Definition of “penalisation” – “penalisation” is significantly expanded and now means: “any direct or indirect act or omission which occurs in a work-related context, is prompted by the making of a relevant report and causes or may cause unjustified detriment to a worker and includes:
  • suspension, lay-off or dismissal;
  • demotion, loss of opportunity for promotion or withholding of promotion;
  • transfer of duties, change of location of place of work, reduction in wages or change in working hours;
  • the imposition or administering of any discipline, reprimand or other penalty (including a financial penalty);
  • coercion, intimidation, harassment or ostracism;
  • discrimination, disadvantage or unfair treatment;
  • injury, damage or loss;
  • threat of reprisal;
  • withholding of training;
  • a negative performance assessment or employment reference;
  • failure to convert a temporary employment contract into a permanent one, where the worker had a legitimate expectation that they would be offered permanent employment;
  • failure to renew or early termination of a temporary employment contract;
  • harm, including to the worker’s reputation, particularly in social media, or financial loss, including loss of business and loss of income;
  • blacklisting on the basis of a sector or industry-wide informal or formal agreement;
  • early termination or cancellation of a contract for goods or services;
  • cancellation of a licence or permit; and
  • psychiatric or medical referrals.
• Definition of “relevant wrongdoing” – The definition of “relevant wrongdoing” is already comprehensive and includes a failure to comply with a legal obligation, damaging the environment, the improper use of public funds or the endangerment of the health and safety of an individual. The new definition broadens the scope of wrongdoing to include breaches of certain EU laws, such as those connected to financial services, products and markets, product safety and compliance; consumer protection; and protection of privacy and personal data for example. It also clarifies that an interpersonal grievance concerning the worker exclusively is not a PD.
• Burden of Proof: This has reversed and the onus is now on the employer. If a worker who has raised a PD makes a complaint of penalisation, it will be deemed to have occurred, unless the employer proves that the alleged act of penalisation was based on other justified grounds.

For additional information with respect to this alert, please contact the following:

Michael Rooney
Partner
T: + 353 1 221 2857 | E: michael.rooney@ie.ey.com

Marie Caulfield
Partner
T: + 353 1 221 1416 | E: marie.caulfield@ie.ey.com

Rachel Dillon
Partner
T: + 353 1 221 2554 | E: rachel.dillon@ie.ey.com

Deirdre Malone
Partner, Head of Employment Law, EY Law Ireland
T: + 353 21 480 5729 | E: deirdre.malone@ie.ey.com

Caoimhe Neary
Director
T: + 353 1 479 4007 | E: caoimhe.neary@ie.ey.com

Elaine O’Gara
Director
E: elaine.ogara@ie.ey.com

Colin Spence
Director
T: + 353 1 221 1240 | E: colin.spence@ie.ey.com

Jennifer Sweeney
Director
T: + 353 1 479 4007 | E: jennifer.sweeney1@ie.ey.com

Waterford

Gillian Moore
Director
T: + 353 1 479 2216 | E: gillian.m.moore@ie.ey.com

Cork

Peter O’Connor
Director
E: peter.oconnor@ie.ey.com