From January 1st 2019, there will be new changes introduced to the PAYE system in Ireland – PAYE modernization.
The changes have been defined as ‘’the most significant reform of the PAYE system in Ireland’’ so it’s essential that both employers and employees know exactly what these changes mean for them.
To help, Immedis have put together a guide of everything you need to know about PAYE Modernization.
What is PAYE Modernization?
In Ireland, the Revenue is introducing real time reporting (RTT) effective from January 1st 2019.
This will mean that each employer is obliged to report the results from their payroll via Revenue Online Service (ROS) in real time. Employers must ensure that all payments and deductions are calculated correctly, the same as before however the difference is that it must be reported in real time as part of the payroll process.
How should employers prepare for PAYE Modernization?
All employers should review their business processes to make sure they will be able to comply with the new payroll reporting requirements. The Revenue recommends, that for the employers to be ready for the PAYE modernization they should follow the steps below:
- Register all their employees with the Revenue
- Ensure they have the correct PPS numbers for each of their employees
- Operate the statutory payroll deductions such as PAYE, USC, PRSI and LPT following the Revenue instructions for each employee (P2C up to end of 2018 and RPN from January 2019)
- Have complete, accurate and up to date payroll data
- Have active ROS digital certificate to meet the reporting requirements on ROS
What are the new employer obligations coming into effect?
With these changes and as of January 1st 2019, all employers will be obliged to report their payroll information at the time they pay their employees.
This means that the Revenue must be provided with:
- The amount of pay
- Payment date
- Payroll deductions for each employee reported to them via a payroll submission on or before the pay date.
The current tax credit certificate issued by the Revenue to the employee (i.e. a P2C issued electronically to the employer) will be replaced with a Revenue Payroll Notification (RPN).
The RPN will provide the employer with the necessary details to correctly deduct the relevant payroll taxes for their employees.
It will also keep records of the employees:
- Tax credits
- Tax exemptions
- Earnings from previous employment.
Employers will need to create an employment record on the Revenue Online Service for all new employees. This can be done by requesting RPN for new employees from the Revenue.
RPNs will be available in real time for employees and this will eliminate the application of emergency taxes (in most cases). Going forward, the start and cessation of employment will be reported via the payroll submission to eliminate the requirement of issuing a P45 form at the end of employment. Similarly, the P46 form will also be no longer used for the purpose of employment registration.
Along with the abolishment of paper forms such as a P45 and P46, the employers will be also no longer be required to:
- Issue a P60 form to the employees at the end of the year.
- Instead, this will be replaced by an end of year statement and it will be available on each employee’s ROS account (i.e. myAccount profile).
- The end of year statement will include details of all pay and deductions from all employment during the tax year. If the employee is not able to use his ROS account, they will be able to request a paper copy from Revenue.
- File a P30 reporting and paying the payroll deductions made.
- Instead, the Revenue will receive information for the payroll deductions via the payroll submissions made on or before the pay date. Based on the payroll submission the Revenue will issue a monthly statement by the fifth day of the following month showing a summary of the employer’s liability for PAYE, USC, PRSI and LPT.
- There will be no change in the due date for making the tax payments i.e. 14th in the following month or 23rd for ROS users who pay and file online.
- File a P35 after the year ends.
- Revenue will simply have this information already based on the payroll submissions made in real time throughout the year.
How will PAYE modernization affect employees?
Many employees are uncertain of how the PAYE modernization will affect them and if there will be any direct impact on their pay. The answer to this question is no.
Employees will still receive their pay as normal and they will still see their payslip with the standard deductions listed on it.
However, employees will no longer receive a P45 or a P60 payment document. Instead, the Revenue will store the information displayed on the P45/P60 document and each employee will be able to check the records through their personal ROS account.
In fact, in good news, the emergency basis of taxation where the employees have been suffering from the higher marginal tax rates (emergency tax)will be used less frequently as employers will be in a position to quickly access an RPN with all the up-to-date details for each new employee.
Going forward, an emergency tax will only be applied in two instances:
- When the employee has not provided his PPS number to the new employer (so the employer has not been able to obtain an RPN); or
- If the employee is not registered for PAYE. Employees should be aware that they can automatically register for PAYE when registering their job on their ROS account
Who can I ask for more help?
At Immedis we have an in-house team of qualified tax and payroll experts who can ensure your compliance with the new real time reporting regime in Ireland.
The payroll software we use to run your Irish payroll is widely recognized and within the Revenue’s approved list. This allows us to comply with the reporting requirements via a direct connection between the software and Revenue’s online facilities. What we offer is:
- Registering as a payroll agent on your behalf to ensure your level of compliance remain at the highest level
- Ensuring compliance through payroll. Running and processing your payroll in a timely and efficient manner
- Complying with the latest requirements from retrieving RPNs, making your monthly submissions to assisting with the payroll tax payments
- Ongoing support and tax advisory services on complex matters such as correct payroll treatment of a certain pay or deduction elements)