PAYE Modernisation is the new Revenue PAYE Reporting System, which will go live on 1 January 2019. To date Revenue advise the new system will apply to all employers without exception.
What is PAYE Modernisation?
Essentially it is a “Real Time Payroll Reporting“ system to the Revenue. The employer will calculate and report to the Revenue their employees pay and tax deductions prior to each pay date.
The new system will ensure the correct tax is deducted from an employee’s payment and the employee will have the certainty of knowing that they are not overpaying or underpaying tax.
Features of the New System
- The employees tax credit and standard rate cut off certificate (P2C) will be replaced with a “Revenue Payroll Notification” (RPN). This will be retrieved each pay period and will contain the relevant details on how to tax each employee (including new employees) for the period in question.
- New employments will need to be registered with Revenue in advance of running the payroll.
- The employer will be required to notify Revenue of the total cash payments and taxable benefits they make to each employee (including directors), the date of the payment and the amount of tax deductible or repayable.
- Potentially, if tax is not withheld correctly by the employer on the employees payments and or taxable benefits, the tax incorrectly calculated will be recouped by Revenue on a “re- grossed“ basis, and not on the actual net amount paid to the employee (click on the Revenue link below for examples on how this will operate).
- The Revenue will issue a monthly statement to the employer with details of the total PAYE, PRSI, USC and LPT deducted for the period in question.
- The P30’s, P45’s, P46’s and end of year returns will be abolished.
Potential Impact – Positives & Negatives
The Revenue will effectively have sight of every single payslip for every employee for each pay period processed.
All data received by Revenue including corrections and the timing of submissions will feed into Revenue’s risk analysis system, which could lead to more Revenue PAYE audits for employers.
Employers who historically do a “tidy up” on the operation of PAYE / PRSI / USC on payments to employees / directors closer to the P35 deadline will become more visible to Revenue under the new PAYE system and will potentially face penalties for non-compliance.
To coincide with the introduction of PAYE Modernisation, Revenue have introduced new anti-avoidance legislation. The new anti-avoidance legislation now states that payments to employees and directors not included in payroll workings will be treated as net pay and will be “grossed up” for the purpose of calculating PAYE, PRSI and USC. Click on the Revenue link below for examples on how this will operate.
Revenue anticipate that the new real time reporting process will significantly reduce the administration burden experienced by some employers in meeting their PAYE reporting obligations. Revenue’s expectation is that the new system will seamlessly integrate into the payroll process. Below is an illustration from Revenue of how the payroll system will integrate with the real time reporting system.
What can you do now in preparation for the new PAYE System?
Revenue recommend that all employers need to carry out a data cleansing and matching exercise for all their employees. As an employer you should ensure: –
- You are registered with Revenue as an employer;
- You have the correct PPS number for each employee including directors;
- Your employees are registered with Revenue as your employees;
- You have an up to date tax credit certificate (P2C) for all your employees;
- You have issued a P45 to anyone who no longer works for you;
- Is there adequate procedures in place to ensure that the correct benefit-in-kind is identified, quantified and communicated to the person / organisation responsible for processing the payroll at the time the benefit is provided to the employee / director?
Revenue will in the coming months undertake a number of customer service visits to organisations across the country to ensure organisations are aware of the new PAYE Modernisation regime.
Next Step – List of Employees
Revenue has started to request employers to submit a “List of Employees” through Revenue’s Online Service (ROS). Employers in legal, accounting, management, architecture, engineering technical testing and analysis sectors have been notified by Revenue (via a ROS banner notification) to upload their employee lists.
The facility to upload the list of employees will be made available on a phased basis throughout 2018. The second tranche of requests to employers will issue in August with the third tranche following in September.
This list of employees will ensure that both Revenue and employer records are accurate and up to date. The list must include; –
- employees who are currently in your employment (including directors)
- employees on long term leave such as maternity leave or sick leave
- pensioners in receipt of payments
- seasonal or temporary employees for whom you have not completed the P45 process
- employees on a career break for whom you have not issued a P45
- employees for whom you have received a PAYE Exclusion Order.
Employees who are currently on a career break and have been issued with a P45 are not to be included.
Revenue has emphasised that the uploaded list must be accurate and complete. Employees who are not included on the submitted list of employees will be treated as having ceased employment on Revenue’s records. As a result a Revenue Payroll Notification (RPN) for 2019 will not issue to the employer for these employees.
If you have any questions in relation to the above or if you would like to discuss this topic further, please do not hesitate to contact a member of our payroll team.
Further information can be obtained from the following sources: –
Revenue’s Website: –
Link to May 2018 Ipass Conference discussion concerning PAYE Modernisation: –