Pay As You Earn (PAYE) modernisation is a new public consultation process initiative introduced by the Revenue to give the existing system a makeshift. The existing PAYE system is in place since 1960 and hasn’t been updated. The Revenue is working to modernise the PAYE system especially to overcome the problem of over and underpayment of taxes.
With PAYE modernisation, every employer must report their employees’ pay and deductions to the Revenue as and when they are paid. This helps the Revenue in deducting and paying the correct amount of Income Tax, Pay related Social Insurance, University Social Charges and Local Property Taxes.
How does the PAYE modernisation work?
At the end of every calendar month, the Revenue will issue a statement with the tax due for the period of time. The organization must positively return the statement to the Revenue by the 14th day after the month end after which payroll taxes have to be remitted by the 23rd day of the following month. If your company has employees paid both weekly and monthly, you must submit separate Payroll Submission Request (PSR)s to the Revenue.
Payroll submissions must be done by organizations before any taxable component cash payments are done to the employees. Employers must revise their internal processes and make sure the taxable expenses are calculated beforehand.
Can payroll corrections be made after submission?
Yes, payroll corrections can be made before or after the employee is paid. The organization has to make the payroll correction and send it to the Revenue which will replace the original submission.
When does the PAYE modernisation come into effect?
The new PAYE system is in effect from 1st of January, 2019.
What benefits does PAYE modernisation offer?
PAYE modernisation improves to streamline the business and reduces the burden of the employers to meet their PAYE reporting deadlines.
Should organizations complete the P35 after the year end? Should P60s be issued to employees?
No, the annual P35 is no longer required since the Revenue will be receiving the file submissions during each day period of time. This will also eliminate the need for P30s. However, organizations must remember that the P35 is still required for the year 2018 while it’s no longer required after that.
P60s need not be produced to employees after 2019, though it is still required for the year 2018 (similar to P35). The Revenue will issue a statement at the end of the year to all employees. All taxpayers will be able to view their certificate of earnings and deductions from the myAccount page on the Revenue portal.
How should Benefits and notional payments be reported?
If there are any Benefits-in-Kind (BIK) payments or notional payments, they must be reported to the Revenue on the day when it is paid or the earlier of the next payday or December 31 of the particular year. Company credit cards use is considered as notional payments. The benefit has to be provided by the organization on the date the card is used (and not when the bill is settled).
What are the penalty charges for non-PAYE modernisation compliance?
The Revenue implies a €4000 fixed penalty for every PAYE breach. There is also a fixed penalty of €3000 which will be imposed on the company secretary for every breach.
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