Changeover to cumulative system of deduction for USC

Since 1 January 2012, the way in which the Universal Social Charge (USC) is deducted by employers has been brought into line with the way in which the PAYE system operates in respect of Income Tax. The version of the Tax Credit Certificate (known as a P2C) that Revenue issues to employers/pension providers for Income Tax purposes also contains information on rates and thresholds for USC purposes.

However, the rates/thresholds for USC purposes are not relevant in relation to certain types of payment that are not chargeable to USC, i.e. social welfare-type payments (see next section). The purpose of this eBrief is to advise employers how they should treat such payments for USC purposes.

Exempt 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 (now part of DSP) and the Department of Education and Skills, etc. A full list of such payments is available in Appendix A to the FAQ document on USC on the Revenue website at: Taxes & Duties – Universal Social Charge (USC) – Universal Social Charge FAQs.

USC exemption

Those making such payments (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 the forms mentioned above.

Source: Revenue Commissioners. www.revenue.ie. Copyright Acknowledged.