Sickness benefit payments are only regarded as income from current employment if they are received whilst in existing employment. If the employment has ended, the payments do not constitute income from current employment. In that case, there is no entitlement to the in-work tax credit.
Temporary Employment Contract
On 25 November 2021, a man entered into a temporary employment contract (Phase A). This contract contains an important provision: the employment relationship ends automatically upon notification of sickness. In 2022, the man reports sick in week 7 and again from week 14 to week 52 inclusive. He receives sickness benefit for these periods. In his 2022 tax return, the man declares €26,962 as income from current employment and claims an employment tax credit of €4,008. The tax inspector sets the employment tax credit at €915.
Labour discount
The court rules that the sick leave notice terminated the employment contract. The sickness benefit that the man received in week 7 of 2022 cannot therefore be counted as income from current employment. There is no entitlement to the employed person’s tax credit in respect of this amount. When the man resumes work from week 8 onwards, a new employment contract comes into effect. This follows from the contractual provision stipulating that the parties must enter into a new contract if the previous employment relationship has been terminated on grounds of illness. This new employment relationship then ends by operation of law upon the man’s second notification of sickness. Consequently, the sickness benefits received by the man in weeks 14 to 52 of 2022 cannot be counted as income from current employment either. Consequently, there is no entitlement to the employed person’s tax credit in respect of these amounts either.