On 1 January 2024, the new enhanced reporting requirements (ERR) for certain non-taxable benefits are due to come into effect (subject to a Commencement Order). We previously provided a short summary of the key aspects of this new ERR regime (linked here). In this short update, we provide some further insight into practical points that we're seeing employers raise on the ERR. As some employers will have seen from Revenue's recently issued eBrief, notices to ROS inboxes have commenced on a phased basis with a link to free webinar sessions to run through the EER (including a facility to ask questions). Employers should participate in these webinars and look to raise the issues / concerns that they have with the new regime. The pressure points for employers that we're seeing most frequently can be broadly categorised under three headings:
- Systems integration issues: Many employers do not have integrated payroll and expense systems and this could lead to practical difficulties in complying with ERR obligations on a timely basis, given the requirement to report details 'on or before' the making of a payment or reportable benefit. For travel and subsistence payments, employers may need to consider making reimbursements less frequently (perhaps monthly) in order to reduce the administrative burden of making multiple reports. This would clearly be an unwelcome development for employees.
- Timing issues for small benefits: Given the broad nature of what may constitute a small benefit for the purposes of the small benefit exemption (beyond mere vouchers – commented on further below), clear timing issues may arise with reporting, particularly where the benefit is of an ad hoc or unexpected nature. In practice, there are likely to be some circumstances where it would simply not be feasible to report a benefit on or prior to its provision.
- Uncertainty on what benefits constitute reportable benefits under section 112B TCA (the small benefit exemption section) and implications for Christmas vouchers: Many employers provide a tax-free voucher to employees at the end of the tax year shortly before Christmas, which will often be the most valuable exempt or potentially exempt benefit received by an employee in the tax year. However, the small benefit exemption is restricted to a maximum of two benefits per tax year with a cumulative value not exceeding €1,000, with the first two benefits always qualifying – ie, without any scope for an employer to select or safeguard what is often the most valuable benefit (in the form of a voucher) provided at the end of the tax year. This point allied with the broad nature of what can constitute a taxable benefit (absent the small benefit exemption) may result in many scenarios where employers could inadvertently utilise one of the maximum two annual tax-free benefits earlier in the year – examples here include the provision of Easter eggs to employees at Easter; the provision of hampers or raffle prizes to employees; and certain 'staff entertainment' that may not strictly fall within the prescribed Revenue guidance on qualifying staff entertainment. This could potentially result in some employees receiving Christmas vouchers on a tax-free basis and others having to be taxed on the benefit if the given employee's threshold for tax-free benefits has been reached (which may often be on a grossed-up basis with the employer accounting for the tax pursuant to a PAYE settlement arrangement (PSA)).
There has been some suggestion from Revenue that certain benefits qualifying as 'minor and irregular' benefits and taxed under a PSA may provide a relief from the practical problem of having to categorise benefits of the nature described above as utilising the small benefit exemption. Based on current legislation and guidance, we do not see any clear basis that would provide a form of safe harbour for such 'minor and irregular' benefits that are reported and taxed through a PSA. However, if the position could be clarified (preferably, by way of legislative amendment or, failing that, clear Revenue guidance), this would be helpful.
In addition to raising practical questions and concerns through the organised webinars, we are working with representative bodies in providing feedback to Revenue in this area. We are also working with clients to ensure their practical issues are raised with Revenue – please contact the team below or your usual Matheson contact if you wish to discuss this topic further or if you have practical concerns that you would like raised.