What You Need to Know about PAYE Modernisation

At this stage, you may have heard about PAYE Modernisation which is coming into effect in Ireland on the 1st January 2019. Time is ticking away to prepare your systems to be compliant with the new rules. So what does it mean for you as a payroll operator and how will it affect your business?

What is PAYE Modernisation?

PAYE modernisation is a redesign of the current PAYE system, the most significant reform since the system was introduced in 1960. Payroll operators will need to calculate and report their employees’ pay and deductions as they are being paid, ‘in real time’. This will involve an ‘Employer Submission’ to Revenue every time an employee is paid. This submission is similar in content to the current P35 return. The purpose of the change is to make it easier to calculate income tax, PRSI, USC and local property tax.

How will PAYE modernisation affect payroll operators?

The effect on payroll operators will depend on whether they are using a payroll software package. It is expected that the workload for payroll operators using payroll software will not increase as they will be capable of communicating directly with Revenue. P30s, P35s and P45s will be no more as this information will be sent to Revenue on the Employer Submission every time an employee is paid. The workload for payroll operators not making use of a payroll software package will increase as annual returns will be replaced by returns for every pay period.

How will PAYE modernisation affect employees?

Employees will have access to their records online which will be updated on an ongoing basis instead of a yearly basis as the case is currently. Employees will have more certainty that they are not over or under paying tax as Revenue will have the most up-to-date information from their employers.  Revenue will be able to more easily recognise if employees are making full use of their tax credits and will be able to prompt employees to reallocate credits if required.

How can payroll operators prepare for PAYE modernisation?

Revenue has released a number of helpful documents in preparation for PAYE modernisation. To start, make sure that your records are up to date. Ensure you have correct PPS numbers for all employees. Register your employees with Revenue. Complete the P45 process for any employees that have ceased employment with you. Make sure you have an up-to-date tax credit certificate for all of your employees. To ensure a RPN is available for each of your employees on January 1st 2019 please send a list for your current employees to Revenue before the end of November. For more information see this document from Revenue entitle ‘PAYE Modernisation Are You Ready?’.

Where can I find out more information?

For all information on PAYE Modernisation, you can find out more on Revenue’s website. They are also hosting a number of regional seminars for employers from September 2018.

PAYE Modernisation