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PAYE Modernisation – A Streamlined Approach for Employers

PAYE Modernisation – A Streamlined Approach for Employers

More than ever before, companies are recognising the need to ensure they have modern solutions in place to avoid potential compliance breaches and costly fines. A major step in this direction for Irish business in 2019 is the introduction by the Irish Revenue Commissioners (“Revenue”) of PAYE Modernisation.

The new online system gives employers, employees and Revenue access to more accurate and up-to-date information relating to Pay As You Earn (PAYE) tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) deductions.

Since January 1, employers are now required to report their employees’ pay and deductions to Revenue on an ongoing basis. PAYE Modernisation and Real Time Reporting (RTR) means that details of what employees earn are now available at any stage during the year, where previously businesses were required to report employees’ earnings at the end of the tax year only, or at the time of leaving their employment.

Information about employees will now have to be submitted for each payroll run. Data will be submitted according to the frequency that payroll is run in each organisation. This eliminates the need for employers to file P30, P45, P46, P60 and P35 returns as the information will be returned to Revenue instantaneously.

The new online system marks the most significant reform of the system since its introduction in 1960. Revenue chairman Niall Cody described the PAYE Modernisation programme as “the biggest shake-up in the State’s tax system since the introduction of self-assessment in the late 1980s.” A similar system has already successfully been rolled out in the UK, called Real Time Information or RTI.

For Employers – The key changes

By now all your PAYE workers should be registered on MyAccount on the Revenue’s online service. But what are the key changes for employers?

Up to date and online

Welcome to the digital world employers. You must now ensure that you report full details of payments made to employees, including PAYE, USC and PRSI, on or before the date of the payment. It all happens through the Revenue’s Online Service (ROS). There’s no change in the payment date of the associated payroll taxes which remains the 23rd of the month after the month of payment for all ROS users who pay and file online.

The P2C is dead. Long live the RPN

With effect from 1 January 2019, the issuing of employer’s copy of an employee’s PAYE and USC tax credit certificate (“P2C”) will be discontinued by Revenue instead being replaced with the Revenue Payroll Notification (RPN). For each employee, the RPN includes data such as their tax credits, their Income Tax and USC cut-off points, and the Local Property Tax (LPT) to be deducted, if applicable.

Report and Review

Employers now receive a monthly statement which is generated by Revenue, available on ROS by the 5th day of the following month, based on the payroll submissions made that have a pay date in the previous month. The employer should review this statement, if there is a difference between the information on the ROS statement and the information in the employer’s payroll system it should be examined and employers should make any necessary corrections. Any errors or amendments should be notified to Revenue before the 14th day of each month.

If any changes are made, Revenue will create a revised statement.  If a statement is not either accepted or amended by the employer before 14th of each month, the statement is deemed accepted as the statutory monthly payroll tax return of the employer and the associated payroll tax liability should be discharged by the 23rd of that month.

No more P60 return, no more P45s and the year-end P35 Report is gone too

Employers are no longer required to submit the annual P35 Report. The P60 and P45 forms have also been abolished with the new system. An end of year statement will be available on each employee’s online account. It will include details of all income and deductions from all employments during the tax year.

The comers and goers

Employees must now register their new employment through Revenue’s ‘My Account’ service. Revenue requires notification when an employee will no longer be employed, on or before the date on which the employment ends, this notification is to be included in the relevant payroll submission.

For employers – the advantages

While some employers have expressed concerns over the administrative cost of the system, the advantages of a more streamlined process are easily identifiable.

  • The online system and RTR will result in a reduction in the occurrence of year end over/underpayments.
  • The system operates seamlessly with payroll software.
  • The RPN will provide the employer with all the necessary information to deduct from the employee the correct tax, USC and LPT (if applicable).
  • A reduced administrative burden for employers in meeting their PAYE reporting obligations.

Compliance is easier/non-compliance is more easily spotted

PAYE Modernisation has certainly made compliance a whole lot easier. It does, though ensure that any late submissions and payroll errors will be more easily identified and non-compliant enterprises can certainly expect Revenue intervention.

This may result in a Revenue compliance intervention and a possible audit. If material differences are found, it could lead to severe penalties so best to get it right first time around.

A bonus for employees

Employees are also expected to benefit from the changes. RTR will mean entitlements to tax allowances and credits can be received more quickly. Gone are the days of employees waiting weeks for amendments to tax credits or their rate band to be reflected in the Revenue notification to their employer.

The real-time data will also ensure employees get the full benefits of credits and reliefs “in year,” which is of huge benefit to the 250,000 workers in the Republic of Ireland with more than one employment.

The system will also make it easier to claim back any tax reliefs due and the availability of real-time information enables Revenue to carry out periodic reviews to ensure employees are using their tax credits and standard rate cut off point to the maximum effect.

A boost for Government coffers

It’s not only the business community who will profit from PAYE Modernisation but the Government too. The introduction of PAYE Modernisation looks set to bring an additional €220 in tax per employer resulting from additional tax compliance across the State. This is expected to boost Revenue’s tax take by €50 million a year.

Our Payroll Services

Our specialist payroll team can assist companies and investment funds with navigating the complexities of the new system, please contact us for further information on how we can help.