Taxation of benefit in kind

Insufficient wages to deduct tax

The tax due on a benefit can be more than an employee's pay. The employer might not be able to deduct the full amount of tax due on the notional pay in one pay period.

In this case, the employer must pay the full tax deductible for the period to the Collector-General. This amount will be reflected in their monthly statement.

Where an employee has no actual pay for a pay period in which they receive a benefit, the employer can pay the tax due on a notional benefit to Revenue on the earlier of:

• the next pay period
• or
• 31 December in the tax year.

The employer should arrange for their employee to repay the tax paid on their behalf to them.

Employee does not repay tax

If an employee does not repay the tax to their employer, the employer should treat the outstanding amount as a benefit. The employee must pay Income Tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) on this benefit.

The employer must treat this benefit as if they provided it on 28 February of the following year. It should be included in their payroll submission as a taxable benefit.

If the employee repays the tax in full to the employer before 28 February of the following year, no further benefit arises.

If the employee stops working for the employer by 28 February, the employer must declare the unpaid balance of tax on the Form P11D.

Next: Spreading tax over the year