Revenue Job Assist - New Tax Incentives

Introduction

Section 16 Finance Act 1998 provides relief to encourage the long-term unemployed to take up employment and also gives an incentive to employers to employ such individuals. These measures are known as Revenue Job Assist. Section 16 inserts two additional Sections into the Taxes Consolidation Act 1997.

Benefit to employees

Section 472A Taxes Consolidation Act 1997 contains provisions to allow a deduction to be made from the total income of a qualifying long term unemployed person in each of 3 tax years after he or she takes up employment. An additional deduction is also available in respect of each qualifying child.

Benefit to employers

Section 88A Taxes Consolidation Act 1997 contains provisions for a double deduction in computing the profits of a trade or profession in respect of earnings, and the employer’s PRSI contribution on those earnings, paid to a qualifying employee in the first 36 months of a qualifying employment.

Employees

The allowance is available to an individual who takes up a qualifying employment, who has been continuously unemployed for the immediate 12 months prior to taking up the job and who has been in receipt of :

• Unemployment Benefit
  or
• Unemployment Assistance
  or
• One-Parent Family Payment.

Time spent on:

• Certain FÁS training courses (non-apprenticeship)
• The Community Employment Scheme
• The Job Initiative programme
• The “Workplace” 5 week job experience programme
• The Back to Education scheme administered by the Department of Social, Community and Family Affairs

will also count as periods of unemployment for Revenue Job Assist provided the individual was in receipt of Unemployment Assistance, Unemployment Benefit or One-Parent Family Payment immediately before going on the course or scheme.

Qualifying employment

A qualifying employment is one where the emoluments from it are charged to tax under Schedule E (generally PAYE) and which:

• Starts on or after 6 April 1998
• Is for a minimum period of 30 hours per week
• Is capable of lasting at least 12 months.

Specifically excluded from the terms of the scheme are the following:

• An employment from which the previous holder of the employment was unfairly dismissed
• An employment with an employer who has reduced the workforce by redundancy in the 26 week period prior to employing a qualifying individual
• An employment which is primarily commission based i.e. over 75% of the earnings derive from commissions.

Special tax allowances

The special tax allowances are an extra personal tax allowance and a tax allowance for each qualifying child. The amounts are as follows:

• Extra Personal Tax Allowance

  Year 1	₤3,000
  Year 2	₤2,000
  Year 3	₤1,000

• Child Tax Allowance for each qualifying child

  Year 1	₤1,000
  Year 2	₤666
  Year 3	₤334

The qualifying individual can claim the allowance for 3 years of assessment. The claimant has the option of commencing with the year of assessment in which the employment commences or the year of assessment following that in which the employment commences.

This is to ensure that the benefits of the allowance are not diluted owing to an employment commencing late in a tax year. Unused allowances from one tax year cannot be carried forward to a later year.

The tax allowances can only be set against income from the new job which has been taken up.

An individual can only have one 3 year period of claim in his or her lifetime.

Married Couples

The allowance is available to qualifying individuals irrespective of their marital status. It is available to both spouses in married cases, provided each is a qualifying individual for the purposes of the allowance.

Each spouse can have a different period of claim e.g. in a tax year where one spouse is in the first year of claim and the other spouse is in the third year of claim, the couple, assuming no qualifying children, are entitled to an allowance of ₤4,000 for that tax year i.e. ₤3,000 for the first mentioned spouse and ₤1,000 for the other spouse. The allowances are due to each spouse against his or her own emoluments from the qualifying job. The allowance or any unused portion of the allowance is not transferable between spouses. This position is similar to the current rules for granting the PAYE Allowance.

Child allowance

The additional child allowance is due for each qualifying child resident with the claimant for the whole or part of a year of assessment. The definition of a qualifying child is the same definition as that used for One- Parent Family Allowance i.e. a child who is:

• Under 16 years of age
  or
• Over 16 years of age and receiving full time instruction at a university, college, school etc.
  or
• Over 16 years of age and incapacitated either physically or mentally, having become so either while undergoing full time instruction or while under 21 years of age
  and

a child of the claimant or if not a child of the claimant, is in the custody of and maintained by the claimant.

The following points should be noted:

• Unlike One-Parent Family Allowance, there is no restriction made if the child has income in excess of ₤720
• Only one allowance of ₤1,000, ₤666, or ₤334 can be granted in respect of each qualifying child
• The amount of the allowance to be granted in respect of each qualifying child (₤1,000, ₤666 or ₤334) depends on which year of the 3 year period the claim is made for e.g. a child born in Year 2 of the 3 year period will qualify for an addition of ₤666 and not ₤1,000

Where two or more people are able to claim for the same qualifying child, there is provision for splitting the allowance.

• If the child is maintained by only one of the claimants, that individual will be entitled to the child allowance
• Where the child is maintained by one or more qualifying claimants, the allowance can be split in the proportion that they maintain the child or in such manner as they jointly notify in writing to the tax office.

Secondary Benefits

Under Revenue Job Assist claimants can retain their medical card for 3 years from the date they return to work. They can also retain other secondary benefits such as rent/mortgage subsidy, fuel allowance etc. for 3 years provided their income is less than ₤250 weekly.

Changing jobs

An employee may change or re-commence employment once during this period and keep the allowance, provided the second job is also a qualifying employment. The allowance will be the allowance appropriate to the relevant year in the 3 year period.

Directors

The allowance is not available to a proprietary director or the spouse of such a director. The position is therefore similar to the rules for granting the PAYE Allowance. The allowance is available to qualifying children of proprietary directors and children of the self-employed who are full-time employees in the businesses of their parents, provided the relevant conditions are met.

Employers

Double deduction

An employer who takes on an employee under Revenue Job Assist is entitled to a double deduction in computing the profits or gains of the trade or profession for:

• Emoluments paid to a qualifying individual in respect of a qualifying employment
  and
• The employer’s PRSI contribution in respect of those emoluments for the period of 36 months beginning on the date the qualifying employment commenced. There is no option for the employer as to when the double deduction starts.

There is no limit on the number of “qualifying employees” an employer can take on, provided the jobs are “qualifying jobs”.

The double deduction is not due if the employer is benefiting or has benefited from other employment schemes in respect of the new employment. However, provided tax affairs are in order, an employer who takes on employees under the Scheme may also qualify for the existing PRSI Exemption Scheme for the first two years of employment. In this situation the double deduction for the first two years will refer solely to the emoluments, the employer’s PRSI contribution for these two years being NIL. Employers can get information on the PRSI Exemption Scheme from the Department of Social, Community and Family Affairs at telephone no. 01-7043867.

The double wage deduction ceases when the qualifying employee ceases to be employed. If he or she is replaced by a further qualifying employee and if the terms of the scheme have not been breached, a separate double wage deduction for that second individual is due for a 3 year period.

If he or she is replaced by a non-qualifying individual or if other conditions of the scheme are not met a double wage deduction is not due. (e.g. if an employee is dismissed in Year 3 in order to claim a double deduction for a further 3 years for a different qualifying individual, the double deduction is not due.)

The allowance is not due if the qualifying individual or his or her employer, is benefiting or has benefited from other employment schemes in respect of the new employment. This will particularly rule out the allowance if:

• The employee is in receipt of the Back to Work Allowance administered by the Department of Social, Community and Family Affairs in respect of the new employment
• The employer has benefited from the Job start programme administered by FÁS in respect of the new employment.

Further Information

The following leaflets giving details of Revenue Job Assist are now available:

Leaflet IT 58

Information for Employees

Leaflet IT 59

Information for Employers

These leaflets are available from any tax office or from the Revenue Forms & Leaflets Service at 01 - 878 0100.