Employment taxes, including PAYE and PRSI impose significant costs and compliance obligations on business owners. Many businesses are rightly worried about the burden of dealing with these obligations, and two very scarce resources, time and cash, are drained as a result. The stress of this burden can be reduced if cash flow and employment tax savings can be made.

Cash Flow Savings

Quarterly Remittances of PAYE/PRSI

Employers whose total PAYE and PRSI payments for the year are €28,800 or less may make quarterly payments to the Collector General instead of monthly. To qualify, the employer must be registered for at least one year and all P35s (annual PAYE/PRSI Returns) must be filed.

Revenue On-Line Service (ROS)

A less significant extension, but useful nonetheless, is the extended payment date for employers paying and filing PAYE/PRSI using ROS. The due date is the 23^rd of the month instead of the 14^th where PAYE/PRSI is due on a monthly basis.

For employers filing on a quarterly basis the due date is the 23^rd day of the first month following the end of the quarter.

Redundancy Rebates

Employers who make Statutory Redundancy payments to employees under the Redundancy Acts 1967 to 2007 are entitled to a rebate. This comes to 60% of the amounts paid, and is obtained by making a claim to the Department of Enterprise Trade and Innovation (DETI). Last year a facility to offset rebates of Statutory Redundancy payments against taxes due was publicised by the DETI and Revenue.

To avail of the offset, employers should make an application to Revenue. Revenue will forward the request to the DETI and statutory redundancy rebates due will be sent directly to Revenue. Where the amount of the rebate exceeds the tax liabilities, the balance will be repaid to the employer.

The claim must be made in accordance with prescribed Revenue procedures, which are on the Revenue website.

Employer Job (PRSI) Incentive Scheme

Employer PRSI is 10.75% or 8.5% where earnings are €365 or less per week. This adds to the cost of employment. Exemption from PRSI may be available under the 2010 PRSI Incentive Scheme.

Employers who employ additional eligible workers in 2010 and qualify under the scheme will be exempt from employer's PRSI for 12 months from the date of approval. The maximum number of employees that can be employed under this scheme is 5% of the existing workforce or 5, whichever is the greater. For small or medium business, employing 100 or less employees, this means that up to 5 additional employees can be recruited. The conditions to be met include:

• Employees must be in receipt of jobseeker's benefit/allowance, one parent family payment or disability allowance for a continuous period of 6 months or on the FÁS Work Placement Programme for at least 3 months
• The job must be new and additional, be for at least 30 hours a week and last for 6 months

As the scheme applies to new and additional jobs created in 2010 and the exemption is for a period of only 12 months, it does not provide sufficient support for employers who want to create employment. There is an urgent need to for the scheme to be extended beyond 2010 and to give a longer PRSI exemption period to employers.

Revenue Job Assist Scheme

Employers can claim a double deduction in respect of wages and salaries (including employer PRSI) paid to long term unemployed employees who qualify for the Revenue Job Assist Scheme^*. The double deduction, allowable under section 88A TCA 1997, can be claimed for the first 36 months of employment. Relief cannot be claimed under this provision if the employer or employee has benefitted under any other employment scheme. This means that if the employer is entitled to PRSI exemption under the Employer Job (PRSI) Incentive Scheme, relief cannot be claimed under Section 88A TCA.

Benefits in Kind

There are some benefits upon which Revenue do not seek to collect tax and PRSI from employees. For the small business, the following benefits may be worth looking at:

• Travel passes provided to employees and directors for use on bus, Luas, and trains under certain conditions
• The purchase of bicycles and safety equipment costing up to €1,000 out of gross income, where the employee uses the bicycle to travel to and from work
• Small benefits not exceeding €250 in a tax year
• Provision of internet connections, computer equipment and mobile phones for e-working from home

Pension Schemes

Contributions made by employers into an approved occupational scheme are exempt from employer's PRSI. A tax deduction in respect of the contribution is also available.

Subsistence and Travel Expenses

Certain subsistence and travel expenses paid by the employer to employees can be paid tax and PRSI free. Revenue Leaflets IT51 (Motoring Expenses) and IT 54 (Subsistence Expenses) and Statement of Practice IT/2/2007 contain the detailed conditions. The amounts paid cannot exceed the approved Civil Service Rates and the employer must keep records of expense claims made and have a control system in place to qualify for the exempt expense payments.

Collector General’s Office and Requests for Instalment Arrangements

Revenue has stated that it will consider instalment arrangements for businesses with cash flow difficulties. The business should contact the Collector General's office as early as possible. The Instalments Section deals with smaller liabilities and the Debt Managements Units deals with cases having larger liabilities. The Case Decision Escalation Framework Guide (CDEF) was published in February 2009. Where an instalment arrangement is entered into, the business authorises payment by direct debit on a monthly basis.

Conclusion

The issues covered in this article, particularly quarterly PAYE/PRSI filing and using ROS for filing and payment should be considered when looking at ways to reduce cash flow difficulties and make savings for the business. Any reduction in the cost of employment taxes will help businesses devote scarce financial resources towards more profitable activities. And where difficulties do arise, early engagement with the Collector General's office is essential before the problems escalate.

Budget 2011 would do well to include measures to reduce employment tax costs for business and allow for the generation of jobs.

Patricia Quigley is Principal of Quigley Tax Consulting

Email: patricia@quigleytax.ie

Tel: 01 4003620