Tax Tips March 2018
Taxation of Maternity Benefit, Paternity Benefit, Adoptive Benefit and Health and Safety Benefit
The following benefits payable by the Department of Social Protection are chargeable to income tax.
- Maternity Benefit
- Paternity Benefit
- Adoptive Benefit
- Health and Safety Benefit
Maternity Benefit is a payment to an employed or self-employed woman who is on maternity leave from work and who satisfies certain PRSI contribution conditions.
Paternity Benefit is a payment to an employed or self-employed person who is on paternity leave from work and covered by PRSI. It is paid in respect of births and adoptions which occur on or after
1st September 2016.
Adoptive Benefit is a payment to an adopting mother or a single male who adopts a child. It is available to both employees and self-employed people. Certain social insurance (PRSI) contribution conditions must be met. Adoptive Benefit is paid for a continuous period of 24 weeks from the date of placement of a child.
Health and Safety Benefit is a weekly payment for women who are granted health and safety leave under the Maternity Protection Act 1994. Health and safety leave is granted to an employee where the employer cannot remove a risk to the employee’s health or safety during pregnancy or while breastfeeding, or cannot give the employee other ‘risk-free’ duties.
The Charging of Income Tax
The charging of income tax on the benefits/payments referred to above (aside from paternity benefit) commenced from 1st July 2013 by virtue of Section 126 of the Taxes Consolidation Act 1997 (as amended by Section 8 of Finance Act 2013). These benefits/payments are exempt from PRSI and the Universal Social Charge.
Margaret commenced maternity leave on 1st May 2013. She successfully applied for maternity benefit from the same date. All payments to Margaret in respect of the period 1st May 2013 to the 30st June 2013 inclusive are made tax free. All payments made to Margaret in respect of the period commencing 1st July 2013 are subject to income tax.
Method of applying taxation
In PAYE cases, the employer will not be required to include the benefit as part of pay for PAYE purposes. Instead, Revenue will, where possible, collect the tax due on this income by adjusting the tax credits and standard rate band in respect of recipients and issue a revised certificate of tax credits and rate bands to the employer. The adjustment to the tax credits and standard rate bands will be the main method of taxing these benefits. In the case of self-employed individuals, any maternity benefit received from 1st July 2013, or any paternity benefit received on or after 1st September 2016, should be returned as taxable social welfare income.