Common Mistakes Businesses Make in Relation to PAYE

Employees/Directors are often placed on the wrong PRSI rate. The cost of an error to the employer can be significant as the rate of employers PRSI is 10.75%

There is a tendency for employees placed on secondment to remain on the Irish payroll system. This can lead to significant time/cost incurred in obtaining refunds for the employee post year end. When certain conditions are met a PAYE exclusion order can be obtained this allows the employee to be paid without deduction of PAYE.

Employers often obtain exclusion orders for Director’s however these can only be obtained in very limited circumstances. Penalties may arise for Director and/or company where an incorrect application is made.

Generally a foreign employer must register and account for Irish PAYE if an employee is carrying out their duties of employment in Ireland. Penalties arise for failure to register and operate PAYE.

Employers often assist employees with some relocation expenses where an employee is moving abroad. These expenses are potentially liable to Irish payroll taxes with some specific exemptions

If an employee forgoes remuneration in return for any benefit, then the legislation in relation to salary sacrifice applies and the remuneration sacrificed is usually taxable in full and so subject to payroll taxes.

A common mistake in calculating motor expenses is that where a journey commences from the employee/Director’s home, the journey is not restricted if the journey from home to temporary place of work is shorter than normal place of work to temporary place of work.

A common error in the calculation of ex-gratia payments is the inclusion of contractual pay in lieu of notice in the ex-gratia payment.

A typical error in the area of tax free cessation payments is the inclusion of total years’ service rather than the number of whole years’ service. With effect from 1 January 2011 cessation payments made are subject to a life time tax free payment limit. It is the employers’ responsibility to ensure that this threshold has not been breached previously by the employee.

Common Mistakes Businesses Make in Relation to PAYE.

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