Enhanced Reporting Requirements
Enhanced Reporting Requirements (ERR) rules that came into operation on 1 January 2024 require employers to implement real-time reporting of certain tax-free expenses and benefits made to employees and directors. These include travel and subsistence payments, remote working allowances and benefits provided under the small benefit exemption (e.g. vouchers and hampers). To date, these rules have required employers to report relevant benefits on or before the date they are provided.
The Bill amends this strict deadline and gives employers the choice of either reporting expenses and benefits in real time (as before) or monthly. The Bill provides for this option to come into effect from 1 January 2027. The relevant reporting deadline has not yet been included in regulations but a Government press release states that the monthly reporting deadline will be the 14th day following the income tax month in which the reportable benefit was provided to the relevant employee.
This change comes in response to stakeholder feedback and recognises ERR’s burdensome compliance lift, principally due to the non-alignment of reporting deadlines with payroll tax statutory filing deadlines. The extended deadline should enable employers to align ERR with general payroll processes, which is a welcome change to ease employers’ compliance obligations.
Ex-gratia termination payments and pensions
Employees in Ireland are generally entitled to a lifetime tax-free amount (capped at €200,000) on ex-gratia payments for employment termination. This tax-free amount can be calculated using different methods that may factor in the value of amounts received or future amounts receivable from occupational pension schemes, including the Increased Exemption or the Standard Capital Superannuation Benefit.
The Bill amends these rules to require amounts from any ‘relevant pension arrangement’ to be included for the purposes of calculating the available tax-free amount. The term ‘relevant pension arrangements’ encompasses many different types of pension arrangement, including personal retirement savings accounts (PRSAs), MyFuture Fund (Ireland’s auto-enrolment pension scheme) and certain qualifying overseas pension plans.
This proposal aligns the treatment of occupational pension schemes with a broader range of pension products.
Conclusion
Employers should consider how these changes may affect their existing reporting processes and the tax treatment of termination payments. Further detail will be important as the measures are implemented.
For more information and expert advice, contact our Tax team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.