On the 1st of January 2019, the modernization of the PAYE system will take effect. A real-time reporting (RTR) payroll system will be put in place, enabling the Revenue agency to ensure that employees have received their correct tax credits and cut-off points, as well as deductions applied throughout the year. The employer tax credit (P2C) will also be replaced with a new Revenue Payroll Notification (RPN). As a result, employers will be required to make a payroll submission to Revenue on (or before) the date the employee is paid. Revenue will then issue the employer a monthly statement on the 5th day of the following month showing a summary of the PAYE, PRSI, USC and LPT liabilities based on payroll submissions for that month.
No doubt there will be a number of advantages as a result of this modernization policy. For example: the
abolition of various “P” forms and returns such as P45, P30, P35 is likely to result in time and cost savings for many employers. In addition, employees with multiple employments will be able to maximize the use of their tax credits and cut-off points during the year. There will also be seamless communications between Revenue and payroll software. Another benefit is that employers will be able to enter an employee’s leave date or request an RPN through payroll software without the need to log into ROS (not all payroll software will have this function).
However, there will also be some confusion among employees because they will no longer be receiving P45, P60 or P21 forms. Small business owners, ad-hoc employers, and employers who use a manual payroll system may also have to struggle to make correct and timely payroll submissions. This complex situation could lead to a Revenue compliance intervention and possible penalties for the employer. Moreover, employers who make late submissions and multiple corrections on payrolls will be identified by Revenue. Consequently, a Revenue compliance intervention could be implemented, resulting in a government audit with severe penalties if substantial differences are discovered.
Nevertheless, there are a number of ways to prepare for this new tax system. The best method to avoid pending disaster is to plan for this modernization of the PAYE system. The first step should be to ensure that the necessary information to complete payroll submissions is held by the employer for each employee. It would also be wise to ensure that all P45’s have been issued and filed with Revenue for any employees who have ceased employment. It is crucial to communicate any upcoming changes in the PAYE system to all employees in order to avoid confusion regarding P45 and P60 forms.
Employers should make sure that all employees have been registered with Revenue and that an RPN has been received for these employees. In addition, employers must try to keep corrections on payroll submissions to a minimum; multiple recurrent corrections may lead to an audit. Remember that the PAYE system operates on the basis of the date of payment rather than the period the payment was earned. For example: A payment on the 25th of January 2019, for work carried out in the month of December, should be processed as month 1 of 2019 on the payroll system.
The bottom line here is that a total revolution on how payroll is processed in Ireland for 2019 is now a reality. Unfortunately, many companies are not prepared for the mandated changes involved. Thus, a good deal of research, communications, and “plain hard work” at both the employer and employee levels will be required.