The Summary of Budget 2019 Taxation Measures which was published on Budget Day noted that Revenue’s updated PAYE system will be fully operational from 1 January 2019. It was further noted that once the system is implemented, it is expected to yield additional exchequer savings arising from increased taxpayer compliance, citing an additional expected tax yield of €50m.
Given the 1 January 2019 introduction date, employers now have less than three months until Real Time Reporting (RTR) comes into effect in respect of the application of Pay-As-You-Earn (PAYE) to their employees’ salaries. Employers should therefore be considering the implications of PAYE Modernisation for their business, including any steps which will need to be taken in the months prior to its introduction.
RTR will require employers to submit the details of each employee’s pay to Revenue on or before each pay day. An accurate and detailed breakdown of all pay, deductions and tax must be disclosed in respect of each employee.
With effect from 1 January 2019, employers will be required to report all employee remuneration and PAYE data to Revenue on or before the payment date of the employee’s remuneration on a real time basis. This will mean that Revenue will have access to PAYE related data each month at the time when the tax is deducted.
Some of the key changes to PAYE processes under PAYE Modernisation and their likely impact on both employers and employees are set out in the table below:
|Key change||What does this mean for employers and employees?|
|All current forms relevant to payroll taxes (i.e. P30, P35, P60, and P45) will be abolished for tax year 2019 onwards.||The first few months of 2019 will mean an overlap of old and new regimes with 2018 reporting forms due but 2019 RTR also in force. Adjusting to the new regime, whilst finalising reporting under the old regime, is likely to place an additional strain on teams responsible for PAYE related processes.|
|The tax details disclosed in each payroll run will be collated and a statement will be issued by Revenue which will become the employer’s payroll tax return, replacing the P30 form.||Accurate information about employees pay will have to be reported to Revenue on or before the date of payment of employees’ salaries. It will no longer be possible to defer collecting and validating the information until the PAYE return filing and tax payment dates.|
|Companies will have 14 days to review the statement issued by Revenue and investigate any errors/discrepancies, before paying over the relevant tax to Revenue by the payment dates in the following month. Tax payment dates will remain unchanged.||Employers with highly manual or complex payroll processes may find it more challenging to collect and validate all of the necessary reporting information on a timely basis.|
|Employers are required to download the latest RPN (Revenue Payroll Notification, which is akin to the current P2C/TCC) for each employee and use the details therein to calculate the payroll taxes to be deducted. These tax details, along with a significant number of other employee specific remuneration data, need to be disclosed in a PSR (Payroll Submission Request), on or before the day on which employees are paid.||This represents a fundamental change to the operation of payroll. Employers will have limited time to collect all relevant information and check it for accuracy. Errors mean that employees’ after tax pay will be incorrect.|
|Where any employee record mismatches are not resolved in advance of 1 January 2019, employees will default to emergency tax. Where no PPSN is provided to the employer the top rate of tax and USC will apply.||Employees may be subject to emergency tax at the higher rate of tax.|
|Where there are a significant amount of routine / recurring errors in an employer’s payroll system, RTR will mean that Revenue will be aware of these errors and corrections.||A high volume of error corrections may well raise the perceived risk of compliance failure by the employer, this may increase the risk of a Revenue audit or other tax compliance interventions.|
Although all employers will be impacted by the introduction of RTR, employers with complex payroll structures can expect to be affected to the greatest extent. They are likely to face the greatest challenges in collecting and validating employee information within such a short period of time in a RTR environment. Payroll features that pose some of the greatest challenges for employers will be described below:
High volumes of seasonal employees or employees with multiple employments ensuring robust processes to capture this information will be critical to compliance with the new requirements.
With less than three months until 1 January 2019, employers need to act with speed to identify and manage any changes that may be required. If your business has not already done so, now is the time to develop and implement your RTR readiness plan.