Revenue Note for Guidance

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Revenue Note for Guidance

PART 18D

UNIVERSAL SOCIAL CHARGE

Overview

Part 18D provides for the universal social charge (USC) on aggregate income from all sources with effect from 1 January 2011. The USC replaced the income levy and the health levy and Part 18D replicates many of the provisions of the income levy.

USC applies to practically all types of income with minimal exceptions. The main exemption is for social welfare payments and other payments of a similar-type character made by bodies such as the Health Service Executive and by similar foreign authorities. Those in receipt of such income are only liable to the USC to the extent that they have income over and above their social welfare entitlements. It applies to gross income and does not take account of various tax incentives and reliefs such as section ‘23 type’ relief. It also applies to income sources that are exempt from income tax such as income of certain artists or income from woodlands. However, it allows for the deduction of normal expenses associated with a trade, including normal capital allowances.

USC has a four-rate structure with different rates applying to different ranges of income. The entry-level threshold is €13,000. However, if this threshold is exceeded all of a person’s income becomes chargeable. There is no ceiling above which the charge does not apply. The lowest rate of 0.5% applies to income up to €12,012. A rate of 2% applies to the next €7,862 and a rate of 4.5% applies to the next €50,170. The highest rate of 8% applies to incomes above €70,044. However, these rates are modified in certain circumstances. Thus, the highest rate for individuals aged 70 or over or who have a full medical card is 2% with chargeable income above €12,012. A surcharge of 3% applies to self-employed individuals with relevant income in excess of €100,000.

An “excess bank remuneration charge” is incorporated into the USC. This charge applies to bonus-type remuneration paid to employees of financial institutions that have received financial support from the State. This charge applies in all respects as if it were USC except that it is charged (in its entirety) at a higher rate of 45%.

An additional USC charge is payable by certain individuals who have invested in property that qualifies for accelerated industrial buildings allowances and ‘section 23’ type relief. An additional 5% surcharge applies from 1 January 2012 to whatever part of an individual’s income (for USC purposes) that exceeds €100,000 in a tax year and that is sheltered by ‘specified property reliefs’.

Employers (and pension providers) are obliged to collect and remit USC through the PAYE system along with income tax. Self-assessed taxpayers are obliged to account for USC through the self-assessment system as if it was an amount of income tax.

531AL Definitions (Part 18D)

Summary

This section contains the definitions used in Part 18D in relation to USC.

Details

“aggregate income for the tax year” means the aggregate of an individual’s relevant emoluments in the year of assessment, including relevant emoluments that are in whole or in part in respect of a year of assessment other than the year of assessment in which they are paid, and relevant income for the year of assessment. Any relevant emoluments paid in a year of assessment are chargeable in that year and are not chargeable in the year of assessment for which they were earned, if this was earlier.

“Collector-General” has the same meaning as it has in section 851.

“employee” and “employer” have the same meanings as they have in section 983 in relation to the operation of the PAYE system, i.e. persons receiving and paying emoluments assessable under Schedule E.

“excluded emoluments” mean emoluments gifted to the Minister for Finance under section 483.

“income levy” has the meaning assigned to it by section 531B.

“income tax month” means a calendar month.

“Income Tax Regulations” means the Income Tax (Employments) Regulations 2018 (S.I. No. 345 of 2018).

“inspector” means an inspector of taxes or another officer of the Revenue Commissioners.

“relevant emoluments” and “relevant income” have the meanings construed in accordance with paragraphs (a) and (b) of the Table to section 531AM(1). Broadly speaking, relevant emoluments is income that is taxed under the PAYE system and relevant income is whatever income (not otherwise exempted from USC) that is not subject to PAYE.

“similar type payments” means certain payments that are of a similar character to payments made under the Social Welfare Acts but that are made by

  • the Health Service Executive (HSE),
  • an ETB in relation to attendance at a SOLAS training course,
  • a sponsor in relation to CES and Jobs Initiative,
  • Department of Education and Skills, and
  • Department of Agriculture, Food and the Marine.

The definition also includes social welfare-type payments that are made by the authorities of another country.

“social welfare payments” means payments made under the Social Welfare Acts.

“tax year” means a year of assessment within the meaning of the Tax Acts.

“universal social charge” has the meaning assigned to it by section 531AM.

Relevant Date: Finance Act 2019