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08 May, 2018

PAYE Modernisation

The introduction of Revenue’s new real-time reporting PAYE regime is an opportunity to review existing pay agreements and payroll practices.

Revenue is in the process of introducing a real-time PAYE regime. The new system may highlight errors in your payroll processes which could trigger Revenue queries so now is the time to ensure that you are operating your payroll correctly.

Immediate Impact

In June 2018, Revenue will ask employers for a list of their current employees. Ahead of this, employers need to ensure that they have correct PPS numbers and addresses for their employees and that all employees are registered with Revenue.

Net vs Gross Pay

Now is also the time to review existing practices and ensure that contracts are in place, payslips are being issued and employees are receiving their correct annual leave entitlements.

Pay agreements should also be reviewed. Too often, farmers fall into the ‘net pay’ trap, usually through something like saying, “I’ll pay you €10 per hour into your hand”. These arrangements can prove costly. In effect, when you agree a ‘take home’ or ‘net’ pay figure, you agree to pay the employee’s PAYE/PRSI for them. Furthermore, if income tax rates rise or the employee’s tax credits change, you will have to pay any additional tax arising. Consequently, where wages are based on ‘take home’ pay rather than ‘gross’ pay, these arrangements should be phased out.

The potential tax advantages of giving other benefits to your employees, such as pension contributions, health insurance, or even electric cars should also be considered. However, keep in mind that Revenue will expect robust processes to be in place for real-time reporting of benefits.

Main Changes

From 1 January 2019, employers will be required to make payroll submireal-time a real time basis each time they pay their employees.

Employers will have to make a Payment Submission Request notifying Revenue at the same time as, or before, each payment of an emolument to an employee rather than once a year as was the case for many farmers and owners of small businesses up to now. Employers will need to specify the amount being paid, the payment date, and any PAYE, USC and PRSI due. Revenue will issue a monthly statement summarising the payroll submission requests made during the month.

An employer return will then be submitted by the 14th of the following month specifying the total PAYE, USC and PRSI deducted from individual employees.

Unless employers amend Revenue’s monthly statement before this deadline, Revenue’s statement will be deemed to be the employer’s return. Where the employer pays and files online via ROS, payment of amounts due to the Collector General must be made by the 23rd of that month.

The new system will eliminate the need for P35s, P30s, P60s and P45s for 2019 and subsequent years.

Farmers with concerns about the transition should seek advice from their accountant without delay.