Emergency Tax Basis 2018
WHEN TO USE EMERGENCY TAX BASIS
An employer applies the Emergency basis of tax to a new employee's earnings where :
- they have not yet received a tax certificate issued to them by Revenue for the employee
- they have not received a form P45 for the employee
- they have received a P45 but it indicates that the Emergency basis applied to the employee in their previous employment
- they have received a P45 without a PPS number stated
TO WHAT PAY DOES EMERGENCY TAX APPLY
Emergency Tax is calculated on the gross pay (after deduction of Pension contributions and permanent health contributions where relevant). Different rules apply depending on whether or not the employee provides an employer with his/her PPS Number.
WHERE THE EMPLOYEE DOES NOT PROVIDE A PPS NUMBER
Where the employee does not provide their PPS Number, the higher rate of tax and USC applies to all earnings while on the Emergency Basis.
If a new employee does not hold a PPS Number, they should be advised to call in person to any Social Welfare Local Office and request
Leaflet SW100 in order to apply for a PPS Number. When they have been allocated their PPS Number from the Department of Social Protection, then they should apply to Revenue for their Tax Credits and SRCOP using Form 12A (available within the Employee tab within CollSoft Payroll).
EMERGENCY TAX BASIS AND REFUNDS
An employer may not make a refund of tax under the Emergency basis. In these circumstances the employer applies the Revenue set emergency tax credits and SRCOP to an employee's earnings dependent on the presence of a PPS number and the length of time for which the emergency basis continues to apply.
Once the employer receives a P2C indicating the tax credits and SRCOP to be applied to the employee and the tax basis (either Cumulative or Week 1 basis) a PAYE/USC refund may occur. A refund will occur where;
- the P2C indicates Cumulative Basis, AND
- the P2C details apply a level of tax credits and SRCOP greater than those previously applied under the Emergency basis, AND
- there is no underpayment of PAYE/USC carrying forward from previous employments within the tax year, AND
- there has been a previous deduction of PAYE/USC within the tax year
Once these circumstances are satisfied and the P2C has been imported or the employee's Revenue details updated a PAYE/USC refund will be calculated and applies automatically in the subsequent pay period.
Emergency Basis: Emergency Rates and Cut-Off Point
SETTING THE BASIS OF PAYE CALCULATION IN COLLSOFT PAYROLL
As explained above, the basis of calculation is set at each individual employee level. To assign the correct basis of calculation at each employee level you must set up the employee record. Within the employee record there is a Revenue record within which you set the varying PAYE, USC, LPT and P45 details particular to the employee.
To set the basis of calculation;
- Access the Revenue for the employee.
- Within the PAYE/USC section flag the appropriate calculation basis for the employee to whom the record belongs.
Emergency Tax Basis: flagging the Emergency calculation basis on the employee record
SEPERATE PERIODS OF EMPLOYMENT WITH ONE EMPLOYER TREATED AS ONE CONTINUOUS PERIOD FOR EMERGENCY BASIS PURPOSES
It is important to note that where an employee has separate periods of employment with one employer in one income tax year, to which
the emergency basis applies, the employment is deemed to commence at the start of the first of these periods and continue to the end
of the last period of employment or 31 December whichever is earlier.
Emergency Tax Basis: Two employments treated as a continuous periods
In order to record that the new period of employment is linked to a previous period, within the same tax year, to which the Emergency basis applied simply record the number of previous weeks that the employee was on the Emergency basis when they last worked for you.
Note: this only applied if both periods of employment are falling within the same tax year.
When setting up the employee's new second record enter the number of weeks to which the Emergency basis previously applied in the 'Emergency Weeks Used' box, as shown below.
Emergency Tax Basis: Entering previous weeks used under the Emergency basis this year
If the emergency basis is still in operation on the following 1 January, the employee is deemed to start a new period of employment on that date. Deeming an employment to commence and continue in this way is solely for the purpose of reckoning "weeks" or "months" so as to apply the correct emergency tax credits and standard rate cut-off points and tax rates.