Are you up to speed with taxation of Welfare Benefits?

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From 1 July 2013 Maternity Benefit, Adoptive Benefit and Health & Safety Benefit, payable by the Department of Social Protection, will be taxed in full, however USC and PRSI will not apply to these benefits.

Maternity Benefit, Adoptive Benefit and Health & Safety Benefit tax will be collected by reducing the annual tax credits and cut-off points for employees in receipt of these benefits. It is therefore important that all payroll administrators review the employee’s tax credit certificates (P2C) files, available through ROS. This review should be completed regularly going forward to ensure the correct tax credits and cut-offs are used by the employer when calculating the net income due to employees.

For self-employed individuals the taxation of Maternity Benefit, Adoptive Benefit and Health & Safety Benefit will be collected upon submitting the annual Form 11 Income Tax Return. It is therefore important for self-employed individuals to advise their accountants and tax advisors if they are in receipt of these benefits. All Department of Social Protection databases are linked directly to the Revenue system. If the income is not returned on the annual Form 11 returns the Revenue system will automatically detect the error and contact the tax payer.

Further information available on Revenue website: http://www.revenue.ie/en/personal/faqs/taxation-welfare-benefits.html

Sarah Dunne is Audit Manager in OSK Audit.

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