Dáil Éireann Debate, Tuesday - 16 December 2025
363. Deputy Louis O'Hara asked the Tánaiste and Minister for Finance if it is legal for a company to pay the benefit-in-kind tax liability arising from benefits given to the directors of the company; and if he will make a statement on the matter. [71561/25]
View answerI thank the Deputy for his question in relation to benefit-in-kind.
I am informed by Revenue that where an employer provides a taxable benefit (benefit-in-kind) to an employee (including its company directors), it is treated as notional pay and the employer should deduct the appropriate amount of Income Tax, PRSI and USC from the employee in the usual manner. This can be done through the PAYE system in line with the normal reporting procedures set out in Chapter 4 of Part 42 of the TCA 1997 and the associated regulations issued thereunder.
In some cases, employers may opt to bear the tax due on this notional pay on behalf of the employee (including directors). To do so, the employer is required to “gross up” the value of the benefit in their payroll, such that the net amount after tax is equal to the amount of the benefit actually received by the employee. Further details on the operation of benefit in kind are outlined in the relevant Tax and Duty Manual: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-01.pdf.
Section 985B of the Taxes Consolidation Act 1997 allows an employer to pay the tax (Income Tax, USC and PRSI) which arises on certain benefits provided to employees (including directors). An employer must make an application to Revenue to avail of this facility which is known as a PAYE Settlement Agreement (PSA). To be a qualifying benefit for the purposes of a PSA, the benefit must be both minor in value and irregular in its frequency, and for which the employer would otherwise have to deduct the tax from the earnings of the employee (including directors) through the normal PAYE system.
Where the employer pays the tax on behalf of the employee (including directors) under a PSA with Revenue, the benefits will not form part of the employee (including directors) total income and the employee (including directors) will not be entitled to credit for, or repayment of, the tax accounted for under such an agreement.
While there isn’t a statutory definition of ‘minor or ‘irregular’ in legislation, whether a benefit is both minor and irregular should be considered based on the facts and circumstances of the occurrence. Where a benefit is provided to employee (including directors) that is not considered to be both minor and irregular, then income tax, USC and PRSI are chargeable on the benefit to that employee or director and the notional pay arising from such a benefit should be processed through the PAYE system as normal.
Further details on the operation of PAYE settlement agreements are outlined on the Revenue website: www.revenue.ie/en/employing-people/paying-your-employees-tax-to-revenue/paying-tax-on-employees-minor-and-irregular-benefits.aspx and the relevant Tax and Duty Manual: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-42/42-04-73.pdf.
