Part 1 - An overview of the ETI Scheme

What is the ETI Scheme?

Essentially it is a scheme where you as the employer deduct income tax from your employees and pay this over to the Income Tax Office.

The ETI Scheme applies to all employers except private householders who employ domestic staff, although (with the agreement of their domestic staff) private householders may elect to operate the ETI Scheme.

It also applies to persons who make payments to sub-contractors and the like in respect of the provision of labour (see Part 13).  Such persons are deemed to be an employer for the purposes of the Scheme.

What is an employee?

An employee is an individual holding or exercising an office or employment.  This includes a company director, a part-timer and a casual worker. It also includes a sub-contractor who provides labour only (see Part 13).

How does the ETI Scheme operate?

The ETI Scheme operates on a quarterly basis:-

Quarter 1 – January, February, March
Quarter 2 – April, May, June
Quarter 3 – July, August, September
Quarter 4 – October, November, December

Throughout each quarter, the employer should deduct tax from their employees in accordance with the individuals coding notice, on each payday.

Details of the gross weekly or monthly wage and deductions made must be recorded and returned with the relevant remittance by the 15th of the month following the end of the relevant quarter e.g. tax deducted during Quarter 1 needs to be submitted by 15th April. 

It is important to point out that should a quarterly return, and payment of any tax deducted, be submitted late you may become liable to a 5% surcharge on the total value of the return, together with a penalty in respect of the failure to submit the return on time (see Parts 8 and 9).