Companies that received correspondence from Revenue yesterday telling them that they owe money arising from overpayments made under the Temporary Wage Subsidy Scheme have until the end of June to agree on a payment plan with the tax commissioners.
The overpayment arose from the application of a blanket payment per eligible employee for the first weeks of the scheme that was later tailored towards actual employee pay.
"The scheme ran from March 26th to October 31st when it was replaced by the Employee Wage Subsidy Scheme (EWSS). For the first five weeks, employers were paid the maximum subsidy rate of €410 per eligible employee. The bulk of the subsidy due back stems from those first five weeks of the scheme," Norah Collender, Professional Tax Leader with Chartered Accountants Ireland explained.
She gave the example of an employee entitled to the average subsidy rate of €280, the employer was overpaid €130 per week for 5 weeks, amounting to a repayment of €650 per employee.
Revenue have said they will not pursue companies that owe a balance of under €500.
According to the figures, 20,000 employers owe between €500 and €3,500, another €10,000 owe back between €3,500 and €20,000 with a small cohort of 1,600 employers owing in excess of €20,000.
"There are debt facilities in place to help employers manage repayment of the subsidies, such as the debt warehousing scheme," Norah Collender said.
"Many are still under financial pressure and it's another layer of difficult debt."
The overpayment only applies to the TWSS and there will not be a repeat arising from its replacement scheme, the EWSS.
Ms Collender confirmed that employees whose wages are being suported by the EWSS would not end up receiving a tax bill as the end of the scheme as they had done with its predecessor.
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
"The employee can start paying the tax due on the TWSS back from 2022 spread over four years. That same situation will not arise under the EWSS where all of the employee tax is looked after by the employer through the payroll system."
According to Revenue's own figures, 56% of employers who availed of the TWSS were overpaid under the scheme and owe a total of €224 million.
66,500 employers availed of the Temporary Wage Subsidy Scheme on behalf of 664,000 employees - at a cost of €2.9 billion - between March and August of last year, when it was replaced by the EWSS.
The scheme was designed to assist employers and employees impacted by the Covid-19 virus, and to encourage companies to keep their workers on the payroll.
"Recognising the demands and challenges faced by employers and their tax agents in this current economic environment the reconciliation information is available to review and finalise until 30 June 2021," the Head of Revenue's Accountant General's and Strategic Planning Division Brian Boyle said.
Provisional statistics reveal that 90% of all TWSS employers have now returned the required data in relation to TWSS subsidies paid out.
However, those who have not are estimated to owe repayments totalling around €77m.
Mr Boyle warned that the "relatively small" number of employers who had failed to engage adequately with Revenue regarding TWSS payments and data associated with them will be deemed liable to repay the entire subsidy received.
"If the information is not provided, then the total TWSS payment received by them over the course of the scheme, as reflected in the reconciliation balance, is fully repayable to Revenue," he confirmed.
The Revenue recommend that employers should engage as soon as possible to address this, in order to reduce their liability for repayment of all subsidies.
Mr Boyle also advises that employers liable for an overpayment and who are eligible to avail of the Debt Warehousing Scheme can warehouse the TWSS reconciliation balance.
"Other employers, not currently availing of debt warehousing and managed by Revenue's Medium Enterprise and Large Corporates Divisions, may apply to warehouse their TWSS reconciliation balance if they meet the general criteria of the Debt Warehousing Scheme," he said.
"Employers not availing of the Debt Warehousing Scheme can pay their outstanding reconciliation balance on ROS or alternatively can apply for a Phased Payment Arrangement and pay the amount owed over an extended timeline," he added.
Additional reporting by Ingrid Miley