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What employers need to do to comply with PAYE Modernisation.

In this guide below, we will discuss how PAYE Modernisation affects your business and your real time reporting obligations to revenue.

PAYE Modernisation:
By now, all employers in Ireland should know about Revenue’s new PAYE Modernisation legislation. This system came into effect on January 1st 2019 and brought with it a new and improved method of reporting PAYE information to Revenue.

PAYE Modernisation has brought many changes to the payroll process. Overall, it brings many benefits to all stakeholders involved – employers, employees and Revenue. However, some smaller employers are finding this new system somewhat difficult to get their heads around.

Revenue Payroll Notifications or RPNs:

With PAYE Modernisation, the first step to processing the payroll is to ensure that the correct tax credits and cut-off points are being used for employees. This is done by retrieving an RPN (Revenue Payroll Notification) from Revenue. Previously, employers were notified of changes to an employee’s tax credits via P2Cs.

Employers are required to always use the most up-to-date RPN when calculating an employee’s pay and deductions. If an employer is using payroll software with direct Revenue integration, tax credit information can be retrieved and updated in the software at the click of a button. If the payroll is completed without payroll software, the employer will be required to login to ROS before they process the payroll every pay period to manually check their employees’ tax credits and cut-off points.

Payroll Submissions to Revenue:

Once the payroll is finalised, employers are required to send a real time payroll submission to Revenue containing details of their employees’ PAYE information. These submissions – known as Payroll Submission Requests (PSRs) – must be sent to Revenue on or before the date an employee is paid every pay period. In most cases, this means a file will be submitted either weekly or monthly. As Revenue will be receiving the periodic file submissions in real time, the annual P35 will no longer be required.

When payroll software is used, these submissions can be seamlessly created and sent directly to Revenue from within the payroll software with just a few clicks. Where an employer processes their payroll manually, the employer would need to login to ROS every pay period to manually upload the various figures for each of their employees, a bit like manually completing a P35 each pay period.

Employer Summary Statement:

Revenue will issue employers with a monthly statement based on the submissions made by the employer, replacing the P30. This statement will give a summary and breakdown of the total liability due, based on the real time reporting payroll submissions sent to Revenue every pay period.

When the monthly statement is available, the employer will have the option to view the statement, accept the statement or amend the payroll submission (if errors are identified). If no action is taken, the statement will automatically be deemed as the return – the employer does not need to manually accept each monthly statement.

At the end of the tax year, the employee will also have access to a summary statement, which replaces the P60. The individual taxpayer can login to their myAccount portal on the Revenue website to view and print their official certificate of earnings and deductions.

Payments to Revenue:

Regardless of the pay frequency, the Revenue payment due dates will remain the same for all employers. If an employer paid Revenue on a monthly schedule prior to 2019, they will still be required to make the payment to Revenue each month. Similarly, if an employer paid Revenue on a quarterly basis, they will still be required to make the payment to Revenue each quarter.

There is no change to the method that employers use to make the Revenue payment. Revenue has also introduced a variable direct debit scheme, whereby Revenue can be permitted to request the value of the monthly liability as opposed to requesting a fixed amount from the employer’s bank account each month.

What happens if I don’t comply?

Non-compliant employers can expect Revenue intervention with non-compliance penalties and fines. An employer is responsible for deducting the tax and paying over the liability to Revenue and so non-compliance will result in interest due by the employer.

The current penalty regime includes a fixed penalty of €4,000 for each breach of the PAYE regulation. It also includes a fixed penalty of €3,000 imposed on the company secretary for each breach. These penalties can be imposed on a per-item basis, so if you are even a mid-size level employer, these penalties can build up.