PEOPLE WHO ARE due to get paid today won’t have to make a larger Universal Social Charge (USC) contribution than normal after a loophole was closed.

During the year, amendments were made to the Finance Bill 2015 to correct an issue whereby an employee may suffer a fall in net income in their last payment of the year in a year where there are 53 weeks or 27 fortnights.

Finance Minister Michael Noonan spoke about the issue in the Dáil earlier this month.

“USC rate bands for employees are divided equally across the year, assuming a 52-week or 26-fortnight year.

“However, a calendar year consists of 52 weeks and one day, or 52 weeks and two days in a leap year. As a result, once every five to six years for weekly-paid employees the additional day will be a payday, resulting in 53 paydays falling within the calendar year.

“Similarly, once every ten to 12 years a ‘fortnight 27′ arises for fortnightly-paid employees. As no USC rate bands remain for that year, the full amount of the pay is liable to higher rates of USC, resulting in a lower net income for the employee in that week or fortnight,” Noonan said.

Income Tax

The same issue arises for income tax purposes, and regulations provide for an additional set of credits and rate bands to be allowed in a ‘week 53′ or ‘fortnight 27′ year.

The amendments that were made to the Finance Bill will provide for additional USC rate bands to cater for the additional payday which falls within the calendar year, so that individuals will not have a larger USC liability solely because of the weekday on which their salary payment falls. This will bring the application of USC into line with that of income tax.

Noonan said that the amendments also “ensure that those who are exempt from USC due to low income do not become liable to USC on all of their income solely as a consequence of the additional day in the calendar year being a payday”.

It similarly provides that those who benefit from the exemption from the higher rates of USC, including those over 70 and medical card holders whose income does not exceed €60,000, will not inadvertently become liable to higher rates of USC.

“These amendments will come into effect for the current year which means that individuals affected by this issue who are due to be paid on 31 December this year will benefit from the changes.

“In cases where payroll providers do not implement the changes within sufficient time for the benefit to be provided to employees in their last salary payment of this year, the relevant refund may be claimed back from the Revenue Commissioners,” Noonan added.

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