BREAKING: The Government is accused of attempting a “sneaky” change to tax law, in a row over whether 600,000 people should face an income tax bill for claiming the Pandemic Unemployment Payment. More on @VirginMediaNews in a moment

The Finance Bill includes a change which enshrines the fact the PUP is taxable - but some think it’s an underhand admission that the payment is NOT subject to income tax. 600,000 people could be affected by the row

Here’s the row. (Prepare for a whistlestop tour of tax law...)

In general, all income is taxable. However the law over time has always included a list of payments or incomes which are not subject to tax.

The Finance Act 2018 updated the list of tax-free income to include this:

So, an ‘Urgent Needs Payment’ (paid under Section 202 of the Social Welfare Consolidation Act 2005) is not subject to tax.

This is important, because when the PUP was finally placed on a legal footing this summer, all previous instalments were described as Section 202 payments:

So it would *appear* the PUP is a form of welfare payment which is not subject to tax. Right?

If you believe that, then THIS clause in the new Finance Bill 2020, published yesterday, is interesting - it adds PUP to a list of other welfare payments which ARE taxable after all:

So is this an attempt to quietly the law, potentially forcing a tax liability on nearly 600,000 recipients of the PUP? Pearse Doherty certainly thinks so:

But the Department of Finance takes a different view - and argues this is only a housekeeping provision.

It tells @VirginMediaNews in a statement this evening that S202 was a “vehicle of convenience” to distribute the PUP… but that the PUP was NOT really a S202 payment at all:

And they might well be right. This is the Section 202 it talks about - and evidently it’s supposed to be paid on a case-by-case basis depending on the particular circumstances of the claimant.

The PUP was not means tested, and originally paid at a flat rate - so does it count?

A similar position came from the Revenue Commissioners when we asked about it previously.

Basically both the taxman and the Government say: the PUP was a Section 202 payment in practice, but not in spirit.

Is that a tenable position? Who knows?...

The Finance Bill is due in the Dáil the week in two weeks’ time and this could easily become a bit of a tinderbox.

While the legal status of the PUP changed in August, the row could affect the tax treatment of nearly 600,000 people.