From January 2019, there are important changes happening to the Irish payroll system. Don’t worry if you don’t know about it yet, we’re here to give you all the important information.
We asked one of our accountants, Kiera McFeely to explain what is changing and how it will affect employers and employees in Ireland.
What Are The Payroll Changes from January 2019?
The changes are related to how the employee’s taxes are reported to Revenue. Currently, employees Income Tax, PRSI and USC is reported to Revenue after the year-end. From January 2019, these taxes will be reported to Revenue on or before the date the employee is paid providing real-time communication. This ensures that all your employees are assigned the correct tax credit and are in the correct tax bracket.
The new system is called PAYE Modernisation or Real Time Reporting (RTR). A similar system has been put in place in the UK already, called Real Time Information (RTI). We have experience with that from serving our UK clients and our experience from the UK is positive. The new process in Ireland will simplify the filing of payroll. It removes some of the current elements of filings. The filings are done in real-time so it means that everything should be filed correctly before year-end and no more surprises.
The current filing forms, such as P60, P30, P35, P45, P46, will be replaced. Instead, you will have an Earning and Deductions Certificate. It will be updated in real-time and available on your MyAccount on Revenue. A monthly statement will also be available for employers to see their Pay As You Earn Liability.
Both the employer and the employee will be able to access the Revenue systems to see payroll information that has been submitted in real-time. The employee will only see the information relevant to them.
What Are The Consequences Of The New Payroll System For Me?
With PAYE Modernisation, employees tax credits will be automatically allocated to the correct employee in the payroll software. If you are not using payroll software, you will be able to process your payroll on Revenue’s Online Service (ROS). ROS is being updated so that you will be able to record your employee information and send it to Revenue from ROS.
Employers have to notify Revenue on or before the pay date and identify what you are intending to pay to each employee. This will automatically update the employees Earning and Deductions Certificate. Therefore, this decreases the risk of overpayment or underpayment of PAYE. Employers, or their accountant, can log in to their account on Revenue and see what tax payments have been made to Revenue from payroll.
Accountant Online use a payroll software called Brightpay for all the clients that have payroll through us. This payroll software, as well as many other payroll software packages, are now updating their software in order to comply with the new filing system.
How Can I Prepare For The New PAYE Modernisation?
There are a few things worth considering:
- Contact your payroll software provider. If you are using a payroll software, you should receive information from them regarding the preparations they are making for the PAYE Modernisation. If you haven’t received anything from them, you should contact them to ask if they will be compliant.
- Update your employee list. Revenue will be looking for an up-to-date list of all your employees by June this year. So if your employee list is not updated, make sure you do it now. The main thing is that you have the correct PPS number for each employee.
- Make sure all your payroll records are in order. Revenue will be doing more site visits in the months following the implementation of PAYE Modernisation, so make sure all your payroll records are in order.
- Set up your direct debit with Revenue. A variable Direct Debit will be available from Revenue after PAYE Modernisation. This will give Revenue authorisation to take the tax payment from your bank account whenever it’s due. For those who have standard pay employees, this would be a good option because you won’t have to transfer the tax payment to Revenue monthly.
- Set up MyAccount on Revenue. Log in to your MyAccount profile to see all tax payments made by you to date.
- Encourage your employees to set to accounts on Revenue. You may also want to encourage your employees to set up an account on Revenue. This will give them access to see their tax information in real time and get their end of year payment, Earnings And Deductions Certificate (the new P60).
Will I Need To Make Any Changes Under The New PAYE System?
The new PAYE Modernisation will be a positive change for the vast majority of employers. However, there are some employers who will have to make some changes.
Employers who have employees on flexible salaries. This can be the case for many startups as they don’t know what their ongoing salary will be at the beginning of the year. These employers will now need to know what they are paying each employee before they pay them and can no longer file payroll returns at the end of the year.
Employers who have limited access to broadband have been doing their payroll manually. These employers will have to make changes to the way they fulfill their payroll duties because PAYE Modernisation is all done online.
If you fall into one of these categories, don’t worry. Revenue has suggested to enter an estimate at the beginning of the year and then file an adjustment at the end of the year. This will mean that the employee may not pay the correct tax through the year so it might be worth getting an accountant to do a calculation for you for the relevant tax brackets, or you can get an indication by using this tax calculator.