Irish Revenue Brief On USC Released

by Jason Gorringe, Tax-News.com, London

06 February 2012

The Irish Revenue has published an e-brief detailing the application by employers of the Universal Social Charge (USC) to social welfare-type payments.

The USC was introduced in January, 2011, and is charged on gross income, including notional pay, after any relief for certain capital allowances, but before pension contributions. The USC is charged at 2% on the first EUR10,036 (USD13,093), 4% on the next EUR5,980, and 7% on the balance.

Since January 1, 2012, the way employers deduct the USC has been brought into line with the way the pay-as-you-earn system operates in respect of income tax. However, the rates/thresholds for USC purposes are not relevant in relation to certain types of payment that are not chargeable to USC - namely social welfare-type payments.

Payments made by the Department of Social Protection (DSP) are not chargeable to USC. This exempt treatment also applies to certain other payments that are similar to social welfare payments. These are paid by other government departments and agencies such as FAS (the Irish employment authority, now part of DSP) and the Department of Education and Skills, among others.

The Revenue has said that those making such payments (for example employers, Departments, agencies, etc.) should not deduct USC when they are making these payments. Nor should these payments be recorded for USC purposes on forms P45, P60 and P35. Where income tax applies they should be recorded as normal. Any non-exempt payments should be treated as normal and recorded on these forms.

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