PAYE Modernisation: Frequently Asked Questions

PAYE Modernisation is a new initiative that is being introduced by Revenue. The existing PAYE system has been in place since 1960 and has not been updated since its introduction. Revenue have been working to update and modernise the PAYE system, in particular tackling the problem of overpayment and underpayment of taxes. With PAYE Modernisation, the main change affecting employers is the real time reporting to Revenue - a submission will need to be made each payroll run. In most cases, this means a file will be submitted either weekly or monthly. As a result, this will eliminate the need to file P30, P45, P46, P60 and P35 returns as information will be returned to Revenue instantaneously.

The new PAYE system, known as PAYE Modernisation will be introduced on the 1st of January 2019.

All employers must ensure that they have registered all of their employees, received an up-to-date tax credit certificate (P2C) for all employees and checked that they have the correct PPS numbers for all employees. In preparation for PAYE Modernisation, Revenue will also be asking employers to send a list of their employees to Revenue. This list will ensure that both Revenue and employer records are accurate and up-to-date. The facility to upload the List of Employees is now available on ROS. Employers should also ensure that they are using PAYE Modernisation compliant payroll software, such as Thesaurus Payroll Manager or BrightPay. Book a demo today to find out how PAYE Modernisation will operate with payroll software.

PAYE Modernisation is being introduced to help all stakeholders - employers, employees and Revenue. For employers, the value will be a significant reduction in the administrative burden. For all stakeholders, it will mean that employers and employees are only paying the tax that is due to be paid. The key goal is to eliminate overpayment and underpayment of taxes so that the whole system is much more streamlined.

A recent review of the success of RTI revealed that the system did achieve what it set out to do. RTI has enabled the tax and benefits system to become more responsive than ever before - PAYE payments and debt are dealt with more effectively and the flow of PAYE payments to the Exchequer has also improved. In Ireland, we have the opportunity to improve on certain aspects of the UK system that were flawed and get it right from the outset.

The reporting process by employers to Revenue will be fully integrated into the employer’s payroll run, thereby contributing to a significant streamlining of business processes and reducing administrative cost for employers. Instead of a yearly P35, a “mini P35”, known as a Payroll Submission Request (PSR), will need to be submitted to Revenue each payroll run. Along with employee pay information, details of employees starting and employees leaving will also be included in the PSR. Checking for updated tax credits and cut-off points will also be an integral part of each payroll run.

Employees will be able to log in to Revenue (MyAccount) and view what has been submitted in relation to them by the employer. Employees will be able to allocate their credits and cut-offs between multiple employments. At the year end, employees will be able to view and print their official certificate of earnings and deductions. Overall, PAYE Modernisation will also result in a reduction of the occurrence of overpayment and underpayment of taxes.

Revenue are providing a facility for employers to manually upload payroll submissions. However, it is recommended to use payroll software, as manually doing this will be very cumbersome and time-consuming. Employers would need to login to ROS and enter all of the required details for all of their employees, a bit like manually completing a P35 each pay period. Also, before processing the payroll in any week, they would need to religiously log in to ROS to get details of tax credits and cut-off points. This facility in ROS will only be available for employers with 5 or less employees. It should also be noted that the manual ROS input screens will not calculate taxes. Click here for more information about manually operating PAYE Modernisation.

No, Revenue will not be providing free software for small employers. For people that don’t have software, there will be an online template where they can fill in how they have calculated their payroll for each of their employees on the ROS system. However, Thesaurus Software is planning on offering a single employer version of BrightPay for 2019 which will be free for one employee and will be useful for micro employers who are currently manually processing payroll.

Payroll software will require much more development to implement PAYE Modernisation. However, for Thesaurus Payroll Manager and BrightPay customers, the payroll software will be easy to use, with the ability to create and send submissions to Revenue at the click of a button.

Thesaurus Software cannot speak on behalf of all payroll software. However, for our payroll products - Thesaurus Payroll Manager and BrightPay - the software will seamlessly integrate with Revenue’s system, making the payroll process as quick and simple as possible. Click here to book a demo to find out how PAYE Modernisation will affect payroll processing.

Thesaurus Software cannot speak on behalf of all payroll software. However, with Thesaurus Payroll Manager and BrightPay there will be no increase in the price of the software as a result of PAYE Modernisation. We are also planning on creating a version of BrightPay which will be free for single employers with one employee. Book a demo of BrightPay.

Not necessarily, payroll operators will be required to send submissions to Revenue each pay run, however. PAYE Modernisation eliminates mundane, time-consuming tasks such as P45s and P46s. The retrieval of tax credits and cut-offs will also be automated meaning less work. However, for director only companies who usually run the payroll once per year, there will be an increased workload as they will be required to run the payroll in real time.

Yes, it will be much more important to take backups of payroll data as soon as the payroll has been finalised each frequency. It would be worth looking at an automated backup facility, such as Thesaurus Connect or BrightPay Connect, which can automatically backup your payroll data and allow the user to restore the data to any particular date and time.

No, as Revenue will be receiving file submissions each pay period, the annual P35 will no longer be required. In addition, this periodic file will eliminate the need for P30s. A P35 will still be required for the 2018 year but after that, there will be no more P35s.

Except for the 2018 year, you will no longer be obliged to produce a P60 for your employees. Revenue will produce an end of year statement for all employees. At the end of a tax year, the individual taxpayer will be able to view and print their official certificate of earnings and deductions directly from the MyAccount portal on the Revenue website.

The files being submitted each pay run will include details of employees ceasing employment. This will mean that P45s are no longer required to be completed by the employer.

A Revenue Payroll Notification (RPN) will replace the current tax credit certificate (P2C). It will be used to retrieve tax credits and cut-off points for new and existing employees. Employers will be able to request an RPN from Revenue directly through payroll software, where employers will have instant access to changes to an employee’s tax credits.

A Payroll Submission Request (PSR) will be used to submit payroll data to Revenue each pay period. This periodic file will eliminate the need for P30s (and P35s).

Payroll Submission Requests (PSRs) will need to be submitted to Revenue ‘on or before’ each pay date.

Revenue understand that there are employers who may experience difficulty with their internet/broadband connection. Revenue is committed to providing a workable solution for these employers. Revenue will also take periods of downtime into consideration, e.g. if there are power outages as a result of a storm or flooding.

Submissions can be made ‘on or before’ the pay date, meaning you can process the payroll and make the submissions in advance, e.g. run 3 weeks payroll at the same time and send the submissions, then if there are any changes when you get back, a correction submission can be sent.

Yes, corrections can be made both before and after an employee has been paid. If the payroll has been processed, the submission has been sent, but the employee has not yet been paid, you can easily do this and the software will automatically make a correction to the submission. Payroll software will also be able to handle corrections after the employee has been paid. You can create a correction submission, and when sent to Revenue, this will replace the original submission. It is worth noting, however, that frequent corrections to the payroll may result in Revenue intervention.

Non-compliant employers can expect Revenue intervention with non-compliance penalties and fines. An employer is responsible for deducting the tax and paying over the liability to Revenue and so non-compliance will result in interest due by the employer. The penalty regime is yet to be tied down by Revenue but there will possibly be a period of leniency while the system is bedding in.

No, with PAYE Modernisation you can have employees on different pay frequencies. You will be required to send separate PSRs for the weekly and monthly paid employees.

No, employees can be kept on their existing pay frequencies.

A new PREM number would be the best solution here.

Yes, separate submissions will be required for each pay frequency - if you have employees on both monthly and weekly pay frequencies, a file will need to be submitted to Revenue each week for the weekly paid employees, and each month for the monthly paid employees. These will then be amalgamated together into the one Revenue payment.

Payment due dates for employers remain the same. Employers who pay Revenue quarterly and annually will be issued a monthly statement from Revenue, but the payment due date will remain the same.

No, payment due dates will remain the same for all employers. If an employer is currently paying Revenue on a monthly schedule, they will be required to make a payment each month and if an employer makes Revenue payments on a quarterly basis, they will still be required to make the payment each quarter.

At present you need to log in and pay Revenue. Revenue are introducing a variable direct debit scheme so it will be just like paying your phone bill.

Yes, it will still be possible to do net to gross calculations with PAYE Modernisation, however it is not recommended. On Revenue’s system, they will only see the gross figure and deductions from that gross amount.

Illness benefit will no longer be notified to employers by Revenue as Revenue will now adjust an employee’s tax credits and cut-off points instead. This means that payroll operators will no longer need to worry about taxing illness benefit. This has been the case since the 1st of January 2018.

From 1st January 2019, you can request a Revenue Payroll Notification (RPN) for any new employees before you pay them. This will create the employment on Revenue’s systems and provide you with the details required to calculate their payroll deductions.

You can request an RPN for a new employee, except where the employee does not have a PPS number or is not registered for PAYE. You will have to apply emergency tax in these cases.

Employees must register their first employment in Ireland with revenue. This can be done through the MyAccount portal in the Jobs and Pensions section. You will then be able to request an RPN. Until an RPN is received, emergency tax will need to be applied.