Tax and Universal Social Charge treatment of income of directors of Irish incorporated companies

Revenue eBrief No. 103/19

Tax and Duty Manual Part 42-04-61 has been amended by the insertion of a new paragraph 1.1 “Payments to Directors”.

The paragraph outlines the correct PAYE treatment where a payment is made to a director and the company is unable to establish the nature of the payment at the time it is made.

Extract:

1.1.Payments to Directors

Payments to office holders, in their capacity as office holders, are chargeable to tax under Schedule E and subject to deductions at source under the PAYE system. Where a company makes a payment to a director and, at the time of the making of the payment, the company is unable to establish by way of documentary evidence at that time that the payment is something other than in the nature of remuneration arising from the directorship, then such a payment is paid to the director in his or her capacity as an office holder and is subject to deductions under the PAYE system.

Note: By virtue of section 987 of the Taxes Consolidation Act 1997, failure to comply with any employer obligation provided for in Chapter 4 of Part 42 of the Taxes Consolidation Act 1997 and the related regulations, may result in liability for a fixed penalty of €4,000. The Company Secretary shall be liable for a separate penalty of €3,000.