After nearly 60 years of helping employers calculate the correct deductions for their employees’ pay cheques, Ireland’s PAYE (Pay As You Earn) system is getting a dramatic overhaul. As of January 2019, PAYE modernisation will change how you report your payroll information to the Revenue Office, so what changes will you see on your payroll?
The biggest and most noticeable change for employers will likely be the scrapping of the P35, the annual report detailing all the information regarding employees during that previous tax year.
This will be replaced by the submission of an electronic file every pay period (be it weekly, monthly, etc). This file will contain information similar to that found in the P35, such as payments and deductions.
It is expected that this new system, called Real Time Reporting (RTR) will reduce the number of overpayments and underpayments made to the Revenue Office each year.
Thankfully, the new system has been designed to be fully integratable into existing payroll software, meaning that employers currently using payroll software should not experience any major increases to their workload.
Unfortunately for smaller businesses who may not have invested in such software, the real time element of the new system may put them under pressure to keep up every pay period.
But the P35 isn’t the only aspect of the old system that will be receiving its P45. In fact, all revenue forms, from P2 to P60, will be gone from next January.
For employers, new and outgoing employees will have their status registered through the real time system, while employees looking for statements such as a P60 will simply retrieve the information from their own online accounts page.
Finally, here are a few tips to help you ensure you are ready for the big change:
Ask all employees to resubmit their PPSN, and build a list of all active employees, with all leavers removed.
Ask all employes to register with Revenue online to ensure that the correct Revenue Payroll Notifications (RPN) are used. This will help avoid miscalculations.
Submissions should be made no later than the day an employee receives payment, and can be made in advance.
Employees with concurrent contracts or returning employees will need new employee IDs.
Any mistakes in the amount paid should be corrected in the following submission period. Leaving it longer to correct mistakes may lead to complications and increased scrutiny.
The changes we will see to the PAYE system are big, and may cause some confusion at first. But overall, it appears that these changes are a necessary update to a system that has been in place since 1960, and will help make the PAYE system fit-for-purpose. If you would like more information on the impending changes, make sure to read the pamphlet released by Revenue, entitled “PAYE Modernisation - Are You Ready?”