Maternity Leave

Taxation of Maternity Leave

From 1st July 2013, Maternity Leave, Adoptive Leave and Health & Safety Benefit will be taxed. The taxation will be operated through an adjustment to the recipients Tax Credits and Standard Rate Cut Off Point (SRCOP) .


Following lengthy discussions by various payroll professionals and groups, Revenue accepted that the proposed method of taxing these benefits by employers were not practical. The taxation of Maternity Leave, Adoptive Leave and H&S Benefit was announced in Budget 2013 and it was proposed by Revenue that similar to the taxation of Illness Benefit, employers would be responsible for the identification, taxation and submission of PAYE on these payments to new and expectant mums.


Following discussion on the practical applications of the proposed collection mechanism, placing a particularly heavy burden on SME’s, Revenue have now agreed to adjust the tax credits and SRCOP of beneficiaries.  Employers will receive amended P2C’s to use from 1st July when processing the payroll making for a smoother and more practical solution of this additional payroll task.


 A full transcript of the e-mail received by the Irish Payroll Association from Revenue reads:


“It was announced in the December 2012 Budget that with effect from 1 July 2013, Maternity Benefit, Adoptive Benefit and Health & Safety Benefit, including any child dependant additions, will become taxable in full. USC and PRSI will not apply.

Tax will not be deducted ‘at source’ by the Dept of Social Protection (DSP) on these payments. Instead, as part of the ongoing exchange of information arrangements between DSP and Revenue, Revenue will receive the payment details which will be updated onto Revenue’s records.

Individuals who pay their tax through the PAYE system will have their annual tax credits and cut-off point reduced by the amount of these payments.  Employers/pension providers will be advised of the adjusted tax credits and cut-off points on employer tax credit certificates (P2Cs).

An eBrief will issue to this effect in the next few days. An Employer Notice will also issue as soon as possible.”


The treatment of Maternity and Adoptive Leave have been a topic of debate for many employers and require additional calculation and consideration within the payroll.  While there is no obligation to do so, some companies choose to pay employees who are out on leave, others don’t.  For the companies who make the payment, the payment from the Department may be directed to the employee or to the employer.  Such issues need to be considered for the purposes of Revenue compliance so its important that the person responsible for processing such payments is aware of the implications of the options available to staff within their business.


For more on Maternity Leave and related Benefits read: 

How to Apply for Maternity Benefit

Child Benefit Tax Entitlements

Tax Free Childcare UK Employers


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