The most significant reform of the PAYE system since its introduction in 1960 is underway. Businesses and employers have until the start of 2019 to get their houses in order.
What is PAYE Modernisation – what’s at stake, what’s being reformed? In a nutshell, it’s about filing returns to Revenue in real time.
Employers will have to calculate and report their employees’ pay and deductions as they are being paid.
“Current practices will have to change,” says Ray Rogers, CEO of Surf Accounts (pictured). “This is especially true if you pay employees net. Revenue now wants to see all tax deductions returned in real time, on the day people are paid.”
As this is a Revenue reform, there will be strict fines for businesses that don’t comply with the new rules.
“Big changes like this rarely run smoothly,” says Rogers. “I’d advise any business to look into this reform and put the necessary fixes in place. There will be a €4,000 fine per employee that hasn’t been returned,” says Rogers.
Revenue expects all businesses to comply with these changes from the minute they come into force on January 1, 2019.
“For small businesses who feel they may have knowledge gaps in the handling of payroll, they have two options,” says Rogers. “The can train their payroll operators if their PAYE knowledge isn’t up-to-date or, they can outsource their payroll to an accountant.”
Goodbye to the P45
Another major part of the reform will be the abolition of all Revenue forms as we know them – namely, the P45, P30, P35, and the P60.
From January 1, 2019, people looking for a mortgage won’t be able to get a p60 to prove their earnings, they’ll just go to the ‘My Account’ portal on the Revenue website and print out what they need.
“Ensure all employees are registered on Revenue’s myAccount system.”
Ten steps to follow for PAYE Modernisation
1: Ensure each active employee has their correct and validated PPSN. P45 all leavers if you’ve not already done so and submit a clean Employee List to Revenue by 31 October.
2: Employees with concurrent contracts with the same employer require a unique employment ID for each contract. Re-joiners within the same tax year also need to have unique employments IDs for each period of employment.
3: Employers are required to use the most recent RPN details available when processing the payroll. You should take this opportunity to review and assess all Payroll procedures and practices.
4: A Payroll Run Submission must be sent to Revenue on or before the date the employee receives a payment.
5: Changes and adjustments required to correct payment errors should always be made in the following pay period. Amendments to prior periods should only arise to correct exceptional issues.
6: Inform all employees it will be in their best interest to register on Revenue’ s myAccount to ensure accurate RPN details are available to the employer. The employee will be on Emergency Tax until the Employer receives a valid RPN from Revenue.
“Review your IT systems. Ensure you are using Windows 7 or later.”
7: Employers can receive “zero value” RPN details for employees e.g. if they decide to assign their full allowances and credits to another concurrent employment. Put a process in place to highlight and discuss any such “zero value” RPNs with the affected employees before the Payroll is processed.
8: Review your IT systems. Ensure you are using Windows 7 or later, that your payroll software is from a reputable and trusted provider and that you have access to your ROS DigiCert and password.
9: For confidentiality, thought may need to be given to using a separate employer registered number for the director or executive payrolls. Any additional payroll will require its own ROS DigiCert.
10: If you provide Payroll Bureau services, you’ll need to co-ordinate all these activities with each of your clients. Your clients, the employers, will need to be set you up with an Agent TAIN and each employer will need to assign you with payroll access, so allow time and resources for this.
For full details on the changes to happen, you can download this PAYE Modernisation guide by Surf Accounts.
Revenue is hosting a series of seminars across the country in the run-up to the modernisation deadline.
You can find out more and book your place here.