Covid subsidy scheme created tax liability for most recipients

Almost all workers whose companies availed of Covid support payments through the temporary wage subsidy scheme (TWSS) and then topped up those payments, ended 2020 with a tax liability, according to Taxback. com.

An analysis by the tax advisers of the first 500 people to take part in an Employee Financial Wellbeing service found an average tax bill owing of €1,000.

It found there was tax owing by 75 per cent of those employees who had been on the pandemic unemployment payment and 86 per cent of those on the TWSS, which operated from March to August last year before being replaced by the employment wage subsidy scheme.

Two-thirds of those affected owed more than €500, with three in 10 owing the Revenue Commissioners more than €1,000.

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"These reviews reveal the extent to which the Covid support payments will impact the tax position of workers," said Marian Ryan, consumer tax manager at Taxback.com. "The reality of it is that most will have a tax liability."

Hardest hit

She said the average salary of the employees who took part in the review was about €46,000, showing that it had been middle-earners who were hardest hit by these taxes.

However, she said most of those affected who had worked with Taxback.com were able to reduce or eliminate that bill with money they were owed for unclaimed expenses and reliefs.

“These employees and thousands of others in the same position around the country can gain from unclaimed medical expenses, prescriptions, e-worker relief or specific flat-rate expenses such as shop assistant allowance,” Ms Ryan said.

Workers who have never before submitted a tax return are now using refunds to offset tax bills, she said.

In other cases, as allowed by Revenue, employers have paid the outstanding tax bills on behalf of their staff.

Ms Ryan urged people to actively claim reliefs, noting that 40 per cent of workers who were not subject to Covid pay supports secured refunds from the Revenues – averaging €430 – for reliefs they had not got around to claiming over the previous four years.