Employers Taxes

Auto-enrolment Pension Scheme. Payroll. Retirement Pension. No Income Tax Relief. Employers, Employees and Directors

Today, 7^th October 2024, the Minister for Social Protection announced that the pensions auto-enrolment scheme will commence on 30^th September 2025. From that date, employers must automatically enroll eligible workers into a workplace pension scheme, as part of a Government initiative, aimed at boosting retirement savings.  This government retirement savings system is for employees who are not already contributing into a pension scheme through their payroll. The Automatic Enrolment Retirement Savings Systems Act 2024 was signed into law on 9^th July of 2024 and a commencement order was signed on 30^th September 2024.  This scheme involves mandatory employer and employee contributions into a pension fund in addition to a Government top up.  With this new auto-enrolment scheme, most workers will now be entitled to (i) their own pension plus (ii) the State Pension on retirement.

So, what is it?

Under this new Act:

• Employees will be automatically enrolled in this scheme if they are aged between 23 and 60 years. It’s important to keep in mind that the employee can voluntarily opt out after six months.

• This auto-enrolment scheme will apply to every private sector worker in Ireland provided that the employee is not in what is termed “exempt employment.”

• The employee must earn more than €20,000 gross per year. Gross pay includes allowances as well as non cash benefits.

• For employees earning less than €20,000 per year or who are outside the prescribed age range, it is possible to opt in voluntarily.

• Contributions will be made by (i) the employee, (ii) the employer and (iii) the Government.

• The scheme will be managed by the National Automatic Enrolment Retirement Savings Authority which is under the supervision of the Pensions Authority.

• In situations where an employee previously contributed to a pension but has since stopped, it is possible for that individual to be enrolled in the scheme, provided they meet the relevant criteria.

• Employer AE contributions will not be taxed as a benefit-in-kind on the employee.

What is an “exempt employment”?

The scheme is aimed at employees who are not paying into a qualifying pension plan.  Therefore, an ‘exempt employment’ is deemed to be one where an employee or employer is already making contributions, through the payroll system, to any of the following: (a) an occupational pension scheme, (b) Personal Retirement Savings Account, (c) a Retirement Annuity Contract or (d) a Pan-European Personal Pension Product.

What are the Auto-enrolment contribution rates?

Contributions to the auto-enrolment pension scheme will be based on a set percentage of your wage/salary (please see below) and deducted through payroll.

Employers must match their employee contributions.

The Government must match one third of the employee contribution.

The Contributions will gradually increase over a ten year period.

The employee contributions will not qualify for income tax relief.

Contributions are capped at €80,000 of an employee’s gross annual salary/wage.  In other words, an upper annual limit of €80,000 applies to earnings.  No contributions are required on earnings exceeding this cap.  Employees earning more than €80,000 per annum can still contribute, however, employer and Government contributions will not apply to earnings above €80,000.

Final Points

• As the Auto-Enrolment Pension Scheme operates throughout your career, you don’t have to do anything if you move jobs.

• In the event of the death of an auto-enrolled employee, it is possible for their personal representative to apply to access the balance in the employee’s account, as part of their estate.

• An employee can suspend contributions at any time.

• Directors who deemed to be “self-employed” for PRSI purposes are not considered eligible to contribute to this Auto-Enrolment Pension Scheme.

• The Automatic Enrolment Retirement Savings Systems Act 2024 provides for a number of offences, with sanctions ranging from fines of €5,000 to €50,000 and/or imprisonment, depending on the particular offence committed.

For further information, please click:

https://www.gov.ie/en/publication/c6d6a-auto-enrolment-your-questions-answered/?referrer=https://www.gov.ie/en/publication/01568-auto-enrolment-your-questions-answered-rol-draft/

https://www.irishstatutebook.ie/eli/2024/act/20/enacted/en/html

https://www.youtube.com/playlist?list=PLfOMyQE5RqGzeqOMKqB1M3KyOCtKU8bjk

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Revenue Tax Audits, Compliance Interventions and Investigations. Code of Practice for Revenue Audit

The Irish Revenue Commissioners introduced a revised Code of Practice for Revenue audits and other compliance interventions, effective from 14^th August 2014.  This updated document replaces the 2010 Code of Practice.  Where a tax compliance intervention notice has issued but a settlement was not been reached before 14th August 2014, you, the taxpayer, have the option to choose whether the settlement is made under the terms of (i) the 2014 Code of Practice for Revenue Audit & other Compliance Interventions or (ii) the 2010 Code of Practice for Revenue Audit.

The following are some of the key changes introduced in Revenue’s new Code of Practice for Revenue Audit and other Compliance Interventions:

• Revenue will now generally focus on a single year or single period where specific risk has been identified. Previously compliance interventions were carried out over multiple years or periods, especially in relation to the National Contractors Project.  Under the new code of practice, the scope of the audit or intervention will be extended in circumstances where material risks have been identified, using a range of data sources covering a number of years or tax periods.

• The Code will apply to more taxes including Local Property Tax.

• Paragraph 3.5 acknowledges that there may be exceptional circumstances where a “no loss of revenue” claim may be considered in relation to non-VAT and RCT cases. The onus of proof, however, rests with the Taxpayer and/or the Tax Agent.

• Paragraph 5 deals with the Surcharge for the late submission of Tax Returns. Clarification has been provided in paragraph 5.4.1 in relation to Income Tax, Corporation Tax, Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax stating “…a late filing surcharge will not be sought where the return was filed on or before the specified return date and a tax-geared penalty was applied to a settlement.”

• Paragraphs 19.1 and 19.1. outline new protocols for e-audits. These include notification procedures, the format of pre-audit meetings for the purposes of reviewing electronic records as well as the data security policy.

• Paragraph 5.8 provides clarification that where there is no clear cause for the delay in finalising the audit or compliance intervention, Revenue cannot delay or withhold taxpayer’s entitlement to credits or refunds of tax.

For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-audit-2014.pdf

What we can do for you

We have a wealth of experience in successfully dealing with Revenue audits, compliance interventions and investigations.  We can assist you to effectively prepare for the intervention, interact/liaise with Revenue and discuss/negotiate settlements, on your behalf.

Our professional services include carrying out detailed VAT and Employer/Payroll Tax Reviews to identify areas of non-compliance, exposure, risk, potential improvements and cost savings, etc.

For further details as to how we can help, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.