126 Tax treatment of certain benefits payable under Social Welfare Acts

Summary

A charge to tax under Schedule E is imposed in respect of certain Social Welfare payments. Relief in the form of partial exemption is available in respect of unemployment benefit. In addition, any element of disability, unemployment or injury benefit payments which relate to amounts in respect of qualifying children is disregarded.

The payments listed in the Table to the Section are exempt from the charge to income tax from 1 January 2019 (section 6A) and previous years (section 6B). This puts the longstanding Revenue practice on a legislative footing.

Details

Definition

(1) “the Acts” are the Social Welfare Acts.

“the Act of 2005 means the Social Welfare Consolidation Act 2005.”,

The charge to tax

(2)(a) Payments of —

• widow’s (contributory) pension,
• orphan’s (contributory) allowance,
• retirement pension, and
• old age (contributory) pension,

are treated as emoluments to which Chapter 4 of Part 42 applies. As such these payments are chargeable to tax under Schedule E and are within the scope of the PAYE system.

(2A)(a)&(b)(i)(ii) From 1 July 2013 payments of –

• maternity benefit
• adoptive benefit and
• health and safety benefit

are treated as emoluments to which Chapter 4 of Part 42 applies. As such these payments are chargeable to tax under Schedule E and are within the scope of the PAYE system.

Any payment of an increase for a qualified adult under the State pension contributory, Pre 1953 State Pension Contributory, State Pension Transition or State Pension non-contributory shall be treated for all purposes of the Income Tax Acts as if it arises to and is payable to the beneficiary of the pension i.e. the pensioner who qualifies for the pension in the first instance.

(3)(a)&(b) Payments of —

• disability benefit,
• unemployment benefit,
• injury benefit which is comprised in occupational injuries benefit, and
• pay related benefit,

are treated as profits or gains from an employment and, accordingly, are chargeable to tax under Schedule E. The tax chargeable is computed in accordance with the Schedule E basis of assessment (see section 112(1)), and the payments are treated as emoluments within the scope of the PAYE system (see Chapter 4 of Part 42). Excluded from the charge to tax, however, is the amount of any such payment, which is referrable to a qualified child (within the meaning of section 2(3)(a) of the Social Welfare (Consolidation) Act, 2005).

(3)(c) Unemployment benefit payable in any period after 6 April 1997 to a person in short-time employment is exempt from tax. Short-term employment has the same meaning as in the Social Welfare Acts and, in effect, means a working arrangement where either —

• the number of days systematically worked in a working week is less than the number of days which is normal in a working week in the employment concerned – typically, a 3 days on and 2 days off arrangement, or
• the number of days systematically worked in a period of 4 consecutive weeks is less than the number of days which was normal in the employment before the reduction in the number of days worked, provided that the number of days worked is equal to at least one-half the number of days normally worked – typically, a week-on/week-off or fortnight-on/fortnight-off arrangement.

Exemptions

(4) The first €13 of the aggregate of the amounts of unemployment benefit payable (other than amounts payable in respect of a qualified child within the meaning of section 2(3)(a) of the Social Welfare (Consolidation) Act, 2005) to a person for one or more days of unemployment comprised in an income tax week (that is, one of the successive periods of 7 days, beginning with the first day of an income tax year) is exempt from tax.

(5) The aggregate of disability benefit/injury benefit payable to an individual in respect of the first 18 days of claim (3 weeks – based on a 6 day week and excluding the 3 waiting days relating to each claim) in 1997–98 and 36 days of claim (6 weeks) in 1998–99 and subsequent years is exempt from income tax.

This exemption has been removed for the year of assessment 2012 and subsequent years.

Ministerial orders

(6)(a) The taxation of disability benefit, unemployment benefit (other than unemployment benefit paid to individuals in short-term employment), injury benefit and pay related benefit payments comes into operation on such day or days as may be fixed by the Minister for Finance by order and different days may be fixed for different orders and for different categories of recipients.

(6)(b) Any order (bringing any benefit in whole or in part into charge to tax) which it is proposed to make must be laid before Dáil Éireann and may not be made until Dáil Éireann has approved the draft order.

(6)(A) Any DEASP payment made to an individual, listed in the Table paid on or after 1 January 2019, is exempt from the charge to income tax.

(6)(B) Any DEASP payment made to an individual prior to 1 January 2019 , listed in the Table shall be treated as exempt from the charge to income tax in the year of assessment to which the payment relates.

TABLE

Description of payment (1)	Basis on which payment is made (2)
Basic supplementary welfare allowance	Section 189 of the Act of 2005
Back to education allowance	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Back to education allowance’
Back to work enterprise allowance	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Back to work enterprise allowance’
Back to school clothing and footwear allowance	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Back to school clothing and footwear allowance’
Carer’s support grant	Section 225 of the Act of 2005
Constant attendance allowance	Section 78 of the Act of 2005
Death benefit – funeral expenses	Section 84 of the Act of 2005
Death benefit – orphans	Section 83 of the Act of 2005
Direct provision allowance	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Direct provision allowance’
Disability allowance	Section 210 of the Act of 2005
Disablement gratuity	Section 75(8) of the Act of 2005
Domiciliary care allowance	Section 186F of the Act of 2005
Exceptional needs payment	Section 201 of the Act of 2005
Farm assist	Section 214 of the Act of 2005
Fuel allowance	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Fuel allowance’
Guardian’s payment (contributory)	Section 130 of the Act of 2005
Guardian’s payment (noncontributory)	Section 168 of the Act of 2005
Household benefit package	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Household benefit package’
Humanitarian assistance payment	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Humanitarian assistance payment’
Jobseeker’s allowance	Section 141 of the Act of 2005
Jobseeker’s transitional payment	Section 148A of the Act of 2005
Medical care	Section 86 of the Act of 2005
Part-time job incentive scheme	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Part-time job incentive scheme’
Rent allowance	Section 23 of the Housing (Private Rented Dwellings) Act 1982
Supplementary welfare allowance	Section 198 of the Act of 2005
Telephone support allowance	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Telephone support allowance’
Training support grant	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Training support grant’
Urgent needs payment	Section 202 of the Act of 2005
Widowed or surviving civil partner grant	Section 137 of the Act of 2005
Working family payment	Section 228 of the Act of 2005
Youth employment support scheme	A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Youth employment support scheme’

Relevant Date: Finance Act 2019