What is PAYE Modernisation?
From 1st January 2019, whenever Irish employers pay their employees, a file must be submitted (electronically) to Revenue containing details of these payments. The contents of this file will be similar to the details currently submitted in the annual P35, however, unlike the annual P35, this file must be submitted each pay period. Therefore, in most cases, the submission will be made either weekly or monthly.
This real time information will enable Revenue to ensure that employees are receiving their correct credits and cut off points. This in turn should mean that the incidence of year end over/underpayments of income tax will be substantially reduced.
Employees will also be able to log on to their Revenue account and, among other things, view the information that the employer has submitted in respect of them.
What direct effect will this have on employers?
In the main, this should be good for employers. Most of the “P” forms (P45s, P46s, P60s and P35s) will be no more as the new periodic file will supersede them.
Payroll software will automatically submit the periodic file to Revenue without the need to physically upload a file on the ROS website. In addition, payroll software will get automatically updated with employee credits and cut off points, again without the need to check for and download P2C files from the ROS website.
The correct treatment of illness benefit should also be facilitated by the new system, eliminating the guesswork and complication involved in the current system.
So, all in all, PAYE modernisation should represent a positive change for employers.
What are the possible downsides for employers?
For most employers there should be no downside, in fact the whole payroll process will be somewhat easier, thanks mainly to payroll software interacting directly with Revenue’s systems.
For those employers who do things after the fact e.g. they pay employees an amount and then sort it out later by working things backwards with the software (net to gross), the transition to PAYE modernisation could be somewhat problematic.
Submission of the periodic file will be required in or around the pay date and late submissions may lead to Revenue intervention. Submission of correction files will be accommodated by the new system, however constant correction submissions may also lead to Revenue intervention and possible interest and penalties. Therefore submission of “best guess” periodic files, followed later by correction files, to reflect what was actually paid, will not be advisable.
These employers need to regularise their business processes so as to ensure that the payroll they process is done so in real time, either by using payroll software or by using their accountants or payroll bureaux on a more timely basis.
This change in mindset is perhaps the largest single challenge facing PAYE modernisation.
Thesaurus Software and PAYE Modernisation
Thesaurus Software is already collaborating with Revenue through the payroll software representative body, the PSDA (Payroll Software Developers Association), to help ensure that the final version of PAYE Modernisation is workable and ready for implementation by 2019.
Our experience in developing similar functionality in the UK means that our development team have the expertise and experience to create the best solution for our Irish customers.
In keeping with our pricing culture, there will be no additional charge for the new functionality.