Revenue begin PRSA risk reviews
Revenue begin PRSA risk reviews
Finance Act 2022 amended the tax treatment of PRSA contributions by employers, such contributions were no longer treated as a benefit in kind for the employee and employer contributions were no longer aggregated with employee contributions for age related contributions. These changes precipitated significant lump-sum PRSA contributions being made by employers to the PRSAs of directors/ employees. There was much speculation amongst tax advisors as to how Revenue would view these large contributions and whether they would be targeted for intervention.
Changes made by Finance Act 2024 mean that from 1 January 2025 there is an employer limit for contributions to a PRSA. This limit is 100% of the employee’s salary, any contributions above this limit will result in a benefit-in-kind charge to the employee.
Revenue level 2 compliance interventions
We are aware that Revenue have begun issuing level 2 compliance interventions (formerly referred to as Revenue audits) focusing on PRSA contributions made by employers on behalf of employees/directors in 2024 and earlier periods.
Significantly, enquiries are being made into the role and duties of the employee/director and contractual arrangements suggesting that the substance of the employment/directorship is in focus. Higher risk cases are likely to be PRSA contributions made for new employees, potentially family members, with little employment history in the business without evidence of undertaking roles or duties of employment.
It is also interesting to note that dividend withholding tax (DWT) has been listed as one of the tax heads under review suggesting that Revenue may attempt to treat offending PRSA contributions as distributions on which a DWT liability (for a corporate employer) would arise, such a distribution would also be taxable in the hands of the employee.
For advice on this matter please contact one of our team:
Mark Doyle – mark@circulo.ie
Amanda Comyn – amanda@circulo.ie
Gearalt O’Neill – gearalt@circulo.ie
