The Minister for Finance, Michael Noonan T.D., published the Finance Bill 2013 on 13th February 2013. The Bill provided for the Budget day announcement that, effective 1st July 2013, Maternity Benefit, Adoptive Benefit and Health & Safety Benefit payments will be treated as taxable income. As with all other Social Welfare payments; Maternity, Adoptive and Health and Safety Benefit will remain exempt from Pay Related Social Insurance (PRSI) and Universal Social Charge (USC).
This measure will mean that women entitled to these benefits will pay the same level of income tax while in receipt of the benefit as they do when they are working.
Once the benefit is approved by the Department of Social Protection, Revenue will be notified of the applicable figure and will reduce the relevant allowances (tax credit and standard rate cut-off point in respect of the employee) accordingly. Revenue will notify the employer or pension provider of the applicable adjustment by means of a new P2C in respect of the employee. The P2C is the employer copy of the employee tax certificate.
The issuance of a revised P2C is the only thing that the employer needs to be actively aware of in relation to maternity or adoptive benefit. However, since the employer pays the first 21 days of the Health and Safety benefit the new taxation provided for in the Finance Bill may have more of an impact on the employer and the payroll administrator here.
The net income paid to the recipient for the period is going to be reduced by the new taxation. Consequently, one significant result of this new provision might be mothers/expecting mothers availing of reduced periods of maternity/adoptive leave.