PAYE Modernisation and Real Time Reporting (RTR)

6 November 2017

International Payroll

Effective from 1st January 2019, The Irish Revenue Commissioners (or Revenue) are set to introduce the biggest change to PAYE reporting since 1944, in the form of PAYE Modernisation / Real Time Reporting (RTR).

According to Revenue, the main objective for this shake up in the PAYE system is to improve the accuracy, ease of understanding and transparency of the PAYE system for all, through real time communication between employers and Revenue. This should ensure that Revenue, employers and employees will have the most accurate, up to date information relating to pay and tax deductions. It is anticipated that this, in turn, will mean that the right tax deduction is made at the right time from employees and paid over to Revenue by employers at the right time.

What will this mean for your employees?

Year-round visibility of all aspects of returns being made to Revenue relating to employees individual pay
Real Time Information (RTI) will enable Revenue to ensure that employees are receiving their correct credits and cut off points
Direct access to online statement setting out the tax credits and standard rate cut-off point for the upcoming tax year and prompts to make any necessary adjustments, including claiming any additional entitlements
Certainty of knowing that they are not overpaying or underpaying tax
Employees optimise the full benefit of their tax credits and rate bands across employments during the year in contrast to the current system where they must wait until year end

What will this mean for you as an employer?

Employers will be required to report pay, tax and other deductions, as well as details of employees leaving the organisation, at the same time as they run their payroll
Details of employees starting employment will be required to be reported before their first pay day
P45s, P60s, P30s and P35s will be no longer be required resulting in reduced administrative burden
Payroll software will automatically submit the periodic file to Revenue without the need to physically upload a file on the ROS website
Payroll software will get automatically updated with employee credits and cut off points, without the need to check for and download P2C files from the ROS website
The final payroll run in the year will generate a pre-populated statement setting out the total tax deductions for the year both at employer and employee level
Whole payroll process will be somewhat easier, thanks mainly to payroll software interacting directly with Revenue’s systems

The current reaction

While feedback received by Revenue to date suggests that most employers welcome the change, some concerns have been raised in relation to certain areas which may interfere with the ability for RTR such as the delays and difficulties in receiving PPS numbers for both Irish and non-Irish national employees and delays in receiving illness benefit notifications. Revenue have confirmed that they will be working very closely with the Department of Employment Affairs and Social Protection during the design phase of PAYE Modernisation to find the best solutions.

Another area of concern is how corrections will be dealt with. Again, Revenue have stated that they will be working with payroll software providers to ensure that the new processes can be fully integrated into payroll as seamlessly as possible with limited burden to employers.

While Revenue are promising a highly efficient change to current practices with little impact to employers, they have identified the need for employers to ensure that they are ready to make the transition in 2019. This will potentially involve a requirement for training for both you as the employer and your employees. It may also involve identifying any current business processes that may need to be changed or improved to ensure that RTR can be achieved.

SD Worx and PAYE Modernisation

The introduction of PAYE Modernisation is undoubtedly going to be a huge change in how our country’s PAYE system operates. However, the information coming through from Revenue to date seems to point to a very positive change.

As with any budgetary change, SD Worx are fully committed to working closely with Revenue and our software provider to ensure that we are ready and fully compliant to make the transition to PAYE Modernisation. As Revenue are collaborating with payroll software providers to ensure that all proposed processes will be integrated into the payroll system, clients should experience no issues. As always, SD Worx will work closely with our customers to ensure that together, we can make the transition to real time as smooth and hassle-free as possible.

It will certainly be interesting to watch developments and see what lies ahead. In the meantime, the key is to ensure you and your employees stay informed with developments to understand what PAYE Modernisation will mean for you.