Taxation of Illness Benefit

Previously some Employers adjusted Cut-Offs by the amount of taxable illness benefit. From 1st January 2012 Employers must include the taxable Illness Benefit with the employee's earnings and subject the taxable Illness Benefit to PAYE but no PRSI or USC applies. For further details on what this means for Irish payroll administrators click on the following link

http://www.revenue.ie/en/business/paye/employer-notices/may-2012.pdf

Revenue have already modified the 2012 P35 XML return file to show earnings inclusive of taxable Illness Benefit and a new dedicated field for taxable Illness Benefit. For payroll this means that illness benefit must now have a seperate pay element.