What is PAYE Modernisation?

From 1^st January 2019, all Irish employers will be required to submit an electronic file to Revenue whenever they pay their employees. The file will contain the details currently submitted as part of the end of year P35, however unlike the P35 which must be submitted once a year, this file must be submitted after each payroll period which in the case of most employers will be either weekly or monthly.

Direct access to real time information will enable Revenue to ensure that employees are receiving their correct tax credits and cut off points. In theory this should result in substantially fewer year end over or underpayments of income tax.

Employees will have online access to their Revenue account and for the first time ever will be able to view the information that their employer has submitted in respect of them.

What impact will this have on employers?

It is widely anticipated that this will be good for employers.

Anticipated Advantages:

• Most of the P forms (P45’s, P60’s & P35’s) will disappear and will be replaced by the new periodic file.
• Payroll software will automatically submit the periodic file to Revenue without the need to physically upload a file on the ROS website.
• Revenue will automatically update payroll software with employee credits and cut off points without the need to update P2C files as is currently the case.
• Employers will find it easier to account for the tax treatment of illness benefit

Anticipated Disadvantages:

• The requirement to submit 52/53 files for employers who run weekly payrolls will increase both costs and the administration burden
• Employers who currently operate a monthly direct debit for PAYE and only complete a single P35 at year end face an increased burden
• Employers who do things after the fact e.g. pay employees an amount and then sort it out later by calculating the payroll taxes backwards (net to gross) will need to change their payroll process
• Regular submission of correction files may lead to Revenue intervention and possible interest and penalties

It is expected that the impact of the changes to the PAYE system will result in many employers who may not have their own internal payroll administrator outsourcing their payroll requirements.

If you would like to discuss how the changes will impact on your business please contact our Payroll department who will be happy to assist you.