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PAYE modernisation

PAYE modernisation

PAYE modernisation

Finance Act 2017 included a number of legislative measures to facilitate the introduction of Real Time Reporting (RTR) for employers in respect of the application of Pay-As-You-Earn (PAYE) on their employees’ salaries. This is more commonly known as PAYE modernisation and will take effect from 1 January 2019.

What is PAYE modernisation?

With effect from 1 January 2019, employers will be required to report all employee remuneration and PAYE data to Revenue on or before the payment date of the employee’s remuneration on a real time basis. This will mean that Revenue will have access to PAYE related data each month at the time when the tax is deducted.

For many employers there is currently a focus on end of year reporting for PAYE related data with lesser consideration given to monthly reporting. For many types of pay, there is currently a time-lag between the date of payment by employers of taxes deducted under the PAYE system and the time when the information is reported so that employers have time to correct errors that may arise.

The arrival of RTR will mean that many employers’ current processes will have to change in order to meet the new timelines for reporting of employee pay and benefits. Broadly speaking, the payment dates under the PAYE Modernisation regime will remain unchanged but the requirement to report information per employee on a real time basis may well accelerate the dates for collating and reporting the underlying data on employee pay and benefits.

Where there are a significant amount of routine / recurring errors in an employer’s payroll systems, RTR will mean that Revenue will be aware of these errors and corrections. A high volume of error corrections may well raise the perceived risk of compliance failure by the employer and increase the risk of a Revenue audit. Employers should therefore take action now to ensure that their payroll systems and processes are ready for the impending changes. This will include ensuring that accurate payroll information can be obtained in time for RTR.

In summary, under RTR:

  • Employers must obtain the latest Revenue Payroll Notification (RPN) for each employee before paying emoluments.
  • Using the data provided on the employee’s RPN, employers will calculate the PAYE, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) deductions required.
  • On or before making the payment, employers must submit a Payroll Submission Request (PSR) to Revenue to provide full details of the emoluments being paid together with the corresponding PAYE, USC and PRSI liability.
  • After month end, Revenue will issue a statement which summarises all PSRs submitted during the month.
  • If an employer agrees with the Revenue statement this will be the monthly return. If not, an employer return must be submitted by the 14th day of the following month detailing the PAYE, USC & PRSI deducted.
  • There will be no requirement for employers to file monthly P30s and annual P35s to Revenue or for employers to issue P35s or P30s.

How can employers prepare for the introduction of RTR under PAYE modernisation?

Employers should take the time now to review their employee data, payroll processes, policies and systems to ensure that they are ready to comply with their RTR requirements on 1 January 2019. In particular, employers should:

  1. Understand their RTR requirements – Employers should identify what reporting rules will apply under RTR and how this may impact their business. Employers should then make the necessary plans to comply. Employers can run a number of different payrolls, each with their own processes, some using in-house and some using external payroll supplier support. Have you reviewed each of these payrolls and assessed the capacity to capture and report all of the required data on a timely basis?
  2. Assess how their systems and processes can support RTR – this will involve reviewing PAYE data sources and how adequate they are for the upcoming RTR requirements. Assess the ease of access and reliability of PAYE data under the current payroll system and the implications for resources the new RTR requirements will have. You may find that there are gaps in the required data, even for longstanding employees. For example, date of birth is required as a data input for each employee – do you have this information for each of your employees?
  3. Deploy and monitor – RTR may involve a significant change management process in your organisation with a need for updated payroll processes and periodic reconciliations.

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