PAYE Modernisation 2019 18 December 2018.
Change to the PAYE System
The PAYE system is changing from 1st January 2019. The new PAYE reporting system is called PAYE Modernisation and it will involve the most significant reform of the PAYE system since its introduction in 1960.
The main objective of PAYE modernisation is to ensure that Revenue, employers and employees have real time information relating to pay and deductions.
Currently, in a payroll reporting there is a focus on the Year-End Reporting – From 2019 the focus is on real-time reporting of accurate data on or before each pay period.
PAYE Modernisation applies to all employers and each employer will need to calculate and report their employees’ (including director’s) pay and deductions as they are being paid.
Compliance & Reporting to Revenue
Every time there is a payment made to an employee or Director full details of the payment, including the employees/director’s name, PPS number, the gross amount of the payment and the deductions for tax, PRSI, USC, LPT, pension PRSA, RAC, AVC deductions, must to be returned to the Revenue on or before the salary payment date. Payments include all salary payments, cash payments, taxable benefits, taxable expense payments, and non-cash benefits in kind.
New pension reporting obligations, to be included with monthly employer returns, include the reporting of the amount of an employer pension contribution and the amount of a PRSA employer contribution to certain pension funds.
There is a new requirement to include reimbursement of expenses in payroll submissions, even if not taxable. Where taxable expenses are reimbursed a separate payroll submission is required on or before the payment is made. Employers must also file monthly USC returns.
If tax is not withheld and reported correctly and on-time the Revenue may calculate the tax due by re-grossing the amount paid to the employee.
Statements from Revenue
Revenue will issue a monthly statement based on your submissions by the fifth day of the following month. The statement will show a breakdown of your liability for:
- Income Tax
- Universal Social Charge
- Pay Related Social Insurance
- Local Property Tax.
The statement will be treated as the return if no amendments or corrections are made before the return due date.
Upon receipt of the statement you need to reconcile your figures to the Revenue’s figures to ensure the Revenue’s statement is correct. If you find errors in the statement, you must correct them before the tax due date. These corrections will then be shown in a revised statement.
Payment date for taxes
The payment date for payroll taxes does not change. However, note that if you currently pay payroll taxes by direct debit each month you will only have been obliged to file one return at the end of the tax year – this process will change from 1st January 2019. From 1st January 2019 you will have to process the payroll each time you make a payment to an employee/director so that you comply with the real-time reporting requirements.
PAYE Modernisation includes the introduction of a variable direct debit scheme for payment of payroll taxes. Under the current direct debit scheme, the Revenue requests a fixed amount from your bank account each month but under the variable direct debit scheme the Revenue will obtain permission to request the value of your monthly liability. You can choose whether you want to remain on the fixed scheme or cancel this (via ROS) and set up the variable direct debit scheme.
New employees will need to be registered with the Revenue in advance of processing the payroll
The current PAYE forms P30, P35, P45, P46 and P60 will be abolished.
The monthly P30 is being replaced by the monthly statement issued by the Revenue.
The filing of an annual P35 will no longer be required. Note that it will no longer be possible to correct errors/omissions that may have occurred during the year by way of filing an amended or supplementary P35. From 1st January 2019 the reporting process must be correct for each pay period, otherwise the Revenue may apply penalties for each separate reporting failure.
The process for employees commencing and ceasing will be dealt with as part of the normal payroll processing and P45s will no longer be required.
The annual P60 is being replaced by a Revenue statement of total earnings, from all employments, issue by the Revenue to each employee/director at the end of the tax year. Your statement will be send directly to your account with Revenue, therefore to ensure that you receive this you must be registered for myAccount with the Revenue To register for myAccount, log on to www.revenue.ie and the login/registration for myAccount on the top right-hand side.
Revenue Payroll Notifications (RPNs) will be available for new employees in real time, which should remove the need for the emergency basis of taxation. The RPN, which will replace the P2C, will show tax credits, income tax and USC cut off points, any previous pay from 1st January (unless week 1/month 1 applied) and the amount of local property tax to be deducted. The RPN will need to be uploaded from Revenue in advance of processing the payroll.
Definition of ‘Date Paid’
‘Date paid’ in the context of PAYE modernisation is defined as the date on which the funds are made available. These dates can be different dependent on how you pay the employee. If you 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 which the funds are scheduled to be made available in the individual’s bank account.
Where a payday falls on a bank holiday and employee payments are due, Revenue regards that day as the payday. This occurs provided the funds are made available to the employee on the previous bank working day.
Important Key Action Points you need to do:
- Review your payroll processes and systems to ensure compliance with the PAYE modernisation process.
- Ensure that your payroll data is complete, accurate and up to date.
- Ensure that all employees are registered correctly with Revenue
- If you use payroll software contact your software provider to ensure the payroll package is ready to meet the new reporting obligation.
- If you are not using payroll software, you will create a payroll file for each payroll run and then log into the Revenue Portal to upload the payroll information for each pay period
- In advance of each pay date you must notify Revenue of the total pay and benefits to be made to each employee/director.
- If you pay your payroll taxes by direct debit you need to decide whether to stay on the current fixed direct debit scheme or cancel the fixed scheme and apply for the variable direct debit scheme.
- Upon receipt of the statement from Revenue, check it carefully to make sure that the figures are correct. If any amendments are necessary, ensure they are made before the tax due date.
- Register for myAccount with Revenue, if you have not already done so.
- Advise your employees to register for myAccount with Revenue