The objective of PAYE Modernisation is that Revenue, employers and employees will have the most accurate, up to date information relating to pay and tax deductions. This will ensure that the right tax deduction is made at the right time from the right employees and, employers pay over the correct tax deduction and contribution for every employee. This will improve the accuracy, ease of understanding and transparency of the PAYE system for all stakeholders.
At its core, PAYE Modernisation means that, for each member of staff, employers will make the right tax deduction when the staff member is being paid, employees will have the certainty of knowing that they are not overpaying or underpaying tax and Revenue will, through real-time reporting by the employer, have the most up to date information possible to determine that each employee is subject to the tax deduction that is appropriate. It is anticipated that this reporting process by employers to Revenue will be fully integrated into the employer’s payroll run, thereby contributing to a significant streamlining of business processes and reducing administrative cost for employers.
Implications for Employer’s Payroll
Employers will report to Revenue pay, tax and other deductions, as well as details of any employees leaving the employment, at the same time as they run their payroll. Details of employees starting employment will be reported before their first pay day. The final payroll run in the year will generate a pre-populated statement setting out the total tax deductions for the year both at the level of the employer and the employee.
Implications for Employees
Prior to the start of each year, an online statement setting out the tax credits and standard rate cut-off point for the upcoming year will be made available to each employee. This will be based on estimated income and information available to Revenue for the employee. Employees will be prompted to make any necessary adjustments to or to update this online statement, including claiming any additional entitlements. Based on this information, a tax credit certificate, reflecting the most up to date information possible, will then issue to the employer and employee and this will ensure tax deductions are correct when salary or wages are being paid during the year.
Revenue will carry out periodic reconciliations throughout the year of employees tax deductions, based on actual pay and tax details, to ensure that employees optimise the full benefit of their tax credits and rate bands across employments during the year. This contrasts with the current system where the employee must wait until the end of the year for such reconciliation and wait for any refund or be faced with a tax underpayment.
Ad-hoc reconciliations will be a feature of the new system based on any changes in circumstances arising during the year. An automatic end of year review will be carried out for all employees based on income on Revenue’s records from all employments, tax credits claimed and available third party data and will confirm the correctness of the tax paid for the year.
Here at PaycheckPlus we expect the Irish PAYE modernised system to be somewhat similar to, and hopefully an improvement on, the UK’s RTI (Real Time Information) system of reporting that most UK employers had access to 2013. So with this in mind, along with Revenue’s proposal, we’ve highlighted the following concerns and possible requirements that the modernised system could bring:
Payroll management concerns and potential business requirements
- The real-time reporting may result in increased administration levels which would increase in-house Payroll management costs for businesses
- More deadlines mean more pressure and greater burden on Payroll staff
- The unspecified amount of “periodic reconciliations” may have time and cost implications for businesses
- Reviewing and correcting data may be limited (re-uploading the correct data may be required rather than updating the already uploaded incorrect data)
- Training is likely to be required for Payroll staff
- Payroll staff must ensure that any software that they use facilitates the modernised system
- The current Payroll processes that businesses and staff use will need to be updated
- Additional data may be required to meet the new system requirements
Update! Read Revenue’s responses to compiled feedback/concerns over PAYE modernisation – download it from their website here.
PAYE Modernisation is coming into effect on 1st January 2019 and will change the way Revenue Commissioners manage payroll taxes with Employers and Employees.
As a valued client of Paycheck Plus we will be helping you to make the transition and managing the on-going filing requirements on your behalf. The first step of the process is the alignment of the Employer records with Revenue files. Revenue have asked all employers to provide a List of Employees before 31st October 2018
In order to do that for you, we need your help.
We will provide you with a list of your current employees as per your payroll records. Please confirm that all Employees are still active.
The List should include:
- all employees (including Directors) who are in your employment:
- those on long term leave such as maternity leave or sick leave
- pensioners in receipt of payment from you
- employees on a career break for whom you have not issued a P45
- employees for whom you have received a PAYE Exclusion Order
When you have confirmed that your Employee List is accurate, we will upload this information to Revenue for data alignment on your behalf. Revenue will the cross check the data on the Employee List to their records and will:
- Commence any employees included on the list but not already registered as your employee
- Cease any employees not included on your list but registered on their records as working with you
- Provide you with the PPSN of employees ceased and commenced on their records to confirm the changes made to their records.
From 1st January 2019 all new employees will need to be registered with Revenue before they get their first payment.
All Employees should therefore register with myAccount self-service platform on ROS where they can view and manage their personal details and tax affairs. We will provide an information handout in the next few weeks showing individuals how to register for myAccount.
This exercise is for the purpose of data alignment in advance of PAYE Modernisation going live so all you need to do at this stage is confirm the details contained on the list of employees is accurate and we will take care of the submission to Revenue on your behalf.
For more related to PAYE Modernisation read:
Employment Wage Subsidy Scheme (EWSS) Q&A
The Employment Wage Subsidy Scheme – What We Know So Far
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