Taxes Consolidation Act 1997 section 986A

Payment made without deductions of income tax

Section 986A provides for the re-grossing of emoluments where an employer fails to operate PAYE on payments made to an employee, or disguises the nature of those payments in its books or records.

• Where an employer pays emoluments without deducting PAYE, or disguises or omits them in its records, the payment is treated as a net-of-tax amount and must be grossed up for income tax purposes
• Re-grossing does not apply to qualifying incentive vouchers under section 112B or to emoluments covered by a PAYE settlement agreement under section 985B, nor does it apply to genuine or innocent payroll errors
• The grossed-up calculation uses the applicable income tax rate only; USC and PRSI are not included in the re-grossing computation but are charged separately on the re-grossed amount
• The re-grossed amount is chargeable to tax on the employee under Schedule E, and credit may be granted to the employee for the additional income tax paid by the employer on the re-grossed payment

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