PAYE modernisation is a real-time reporting (RTR) payroll system which takes effect on January 1, 2019 and will enable Revenue to ensure that employees are receiving their correct tax credits and cut-off points so that the correct deductions are being applied for every employee throughout the year when they are paid as compared to the current PAYE reporting system which is done by the preparation and filing of P35’s on an annual basis.
This ensures that Revenue have accurate information for employees at all times and also employees will have full online access in real time to their payroll information as submitted by their employer to Revenue.
With real-time reporting the employer needs to ensure that he reports accurate data on a real-time basis each pay period. This will minimise the risk of employees being either overpaid or underpaid.
Disadvantages of RTR
Unfortunately, a significant burden will be placed on employers who process their payroll manually or even occasionally. Making employee submissions to Revenue for each pay period will be time consuming. A manual process can lead to errors and increase the risk of non-compliance which can result in Revenue intervention.
Tax will be levied by Revenue on a grossed-up basis if deductions are not timely and properly calculated on payments made to employees. Employers who attend to their payroll obligations on an ad-hoc basis will in all probability be investigated by Revenue and face severe non-compliance financial penalties.
The Revenue’s REAP system will identify employers making payroll corrections and the timing of their submissions which can result in Revenue Audit. Where material differences arise, it is anticipated that employers will be subject to an extensive review of data and detailed queries from Revenue.
Knowing the way Revenue can operate it is likely that corrections will result in confusion, a complete waste of time and financial penalties to boot. But we can help you if you outsource your payroll process to us.
- P30s, P45s, P60s and P35 end of year returns will be eliminated
- The current Tax Credit Certificate (P2C) will be replaced by a Revenue Payroll Notification (RPN)
- Employers must notify Revenue of all payments they make to employees including the date of payment and the amount of tax deducted
- Revenue will issue a monthly statement to employers on the total PAYE, PRSI, USC and Local Property Tax (LPT) deducted by the employer
Employers should prepare for the new regime by ensuring that their current records are up-to-date and their existing payroll obligations are met by:
- Ensuring the PPS numbers provided by all employees are correct
- Applying for employee PPS numbers for employees who do not have one
- Ensuring that all employees are registered with Revenue and up-to-date tax credit certificates have been received
- Issuing a P45 for employees who have ceased employment and filing them with Revenue
- Ensuring they now hold a complete PAYE, PRSI and USC record for each employee
Areas that employers should consider include:
- Allocating responsibility for operating RTR properly
- Establishing procedures to ensure the accuracy of the data used and errors are reduced
- Having proper controls to ensure that non-salary benefits are being accurately calculated every pay period
- Non-salary payments are provided for PAYE calculations
- New employee data is inputted immediately to the payroll system
- Being fully aware of the duties of an employer under RTR
List of Employees
Revenue is currently requesting that employers send them a list of their employees to ensure that their records and the employers records are accurate and up-to-date.
The list must include:
- Employees who are currently employed (including directors)
- Employees in long term leave such as maternity leave or sick leave
- Pensioners in receipt of payments
- Seasonal or temporary employees who have not been issued a P45
- Employees on a career break who have not been issued a P45
- Employees with a PAYE Exclusion Order
On receipt of the list Revenue will commence any employees as working with that employer if they are included on the list but are not registered on Revenue records. They will cease any employees not included on the list but who are registered on their records as working with that employer.
Revenue will provide the employer with the PPS numbers of employees ceased and commenced on their records when they receive the list of employees. If there is a difference between Revenue records and the employer records the employer will be asked to confirm that the list is to be processed.
Payroll Steps 2019
In 2019 an employer prior to each pay date prior to paying employees will need to:
- Inform Revenue of the total payments and taxable benefits to be made to each employee
- Obtain RPN’s from Revenue which provide details on how to tax each employee for that pay period.
The employer will then:
- Process the salary payments to employees
- Report to Revenue payments and deductions for each employee
- Pay the relevant deductions to Revenue
It is absolutely essential that accurate information is provided on a timely basis so that payrolls are properly completed. This is especially so for non-salary items such as taxable expense payments and non-cash benefits in kind.
An RPN will provide:
- Tax credits
- PAYE and USC cut-off points
- Any previous pay, tax and USC from January 1 (unless a notification is on a Week 1 or Month 1 basis)
- PAYE and USC exemption if applicable
- LPT deduction if applicable
From January 1, 2019 an employer can request an RPN for any new employee before being paid. This request will create the employment on the Revenue records and will provide the employer with the details required to calculate the correct payroll deductions.
Emergency tax will continue to apply where an employee:
- Does not have a PPS number
- Is working in the state for the first time
Pay and deductions must be reported by employers to Revenue on or before the date the employees are paid. The “date paid” is defined as the date in which the funds are made available to employees.
If you the pay the employee by:
- Cash – it is the date the cash is given to the employee
- Cheque – it will be the date on the cheque
- Bank transfer – it is the date on which the funds are scheduled to be made available in the individual’s bank account.
Where a pay date falls on a non-bank working day Revenue regards that day as the pay date provided the funds are made available to the employee on the previous bank working day.
Revenue will issue the employer, based on his submissions, with a monthly statement on the 5th day of the following month showing the summary of the total liability for PAYE, PRSI, USC and LPT.
This statement will be treated as the monthly return if no amendments or corrections are made before the return due date which is the 14th day. If there are errors in the Revenue statement, the employer must correct them and these corrections will be shown in a revised statement.
Revenue Payment Due Dates
Payment due dates for employers remain the same.
Monthly remitters have a payment due date of 14 days after the end of the month (23 days for ROS Users who file and pay online).
Quarterly remitters will have a monthly statement issued by Revenue which becomes their monthly return. Their payment due date will remain the same which is 14 days after the end of each quarter (23 days for ROS Users who file and pay online).
Annual remitters will have a monthly statement issued by Revenue which becomes their monthly return. Their payment due date will remain the same which is 14 days after the end of the year (23 days for ROS Users who file and pay online).
If employers avail of the direct debit scheme they must ensure that the accumulated monthly payments are sufficient to cover the annual liability.
If an employee has been overpaid the correction to recover this overpayment should be made in the next payroll period.
If a non-employee has been underpaid the correction of the underpayment should be made in the next payroll period.
If an employer incorrectly completes the submission it is possible to make amendments to the submission to rectify the error. This should be done before the return due date to avoid penalties being applied. Any valid corrections submitted by an employer will update the financial totals once the submission is processed by Revenue. If the corrections are for a previous billing period, a revised return will issue for that period.
WE CAN HELP YOU!
If you have any questions about PAYE modernisation we will be more than happy to talk through your options with you including outsourcing your complete payroll requirements to us to give you peace of mind and avoid possible financial penalties. We can take care of everything.