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  • The Minister for Finance’s Budget 2017 speech:

‘           The Revenue Commissioners are launching a consultation process… that is intended to lead to a fundamental redesign and modernisation of the PAYE system.’

  • Payroll tax is now greater than corporate taxes globally, and therefore this announcement in Ireland on Budget Day came as no surprise.

 

  • After a public consultation 8 week period, Revenue decided the proposed reform of the current (50 year old) PAYE system will take effect on 1 January 2019..

Modernisation means REAL TIME REPORTING (RTR)

  • It follows the path taken by the UK, where RTR has been in place since April 2013.
  • RTR has been in place in Ireland for the Construction Industry as Relevant Contracts Tax (RCT) since 1 January 2012. This electronic reporting system captures all interactions between principal contractors and Revenue and has been strictly enforced since its introduction.
  • For employers, PAYE RTR will mean having to report pay, tax and other deductions, as well as any employees leaving their employment, at the same time as they run their payroll function.
  • In a nutshell, the reporting obligation of all employers will need to be integrated into their individual payroll runs. No more P30s, P35s, P45s or P60s.
  • The current system allows some backdating of Payroll Reports that will not be possible from 01/01/2019.
  • Employers need to be aware of the pitfalls and risks that can occur for compliance in each pay period, timeliness of date reporting will be key. Are any BIK and/or claims all collated and input correctly?
  • Employers will need to do a full review of their reporting and tracking before 2019. Is the BIK updated?
  • Payroll Software will need to be reviewed to ensure compliance with the new obligations.
  • Employers may also face expectations from employees in relation to the processing and reporting to Revenue of their pay and tax details, supporting their claim for tax credits on a real time basis.
  • Employers’ day to day interaction with Revenue will increase as a result of RTR, which could impact on the overall relationship with Revenue going forward.

According to Revenue, their anticipated benefits for stakeholders include:  

  • Streamlined business processes, reducing the administrative burden on employers; and
  • Up to date information for employees on the calculation of their tax deductions.
  • The ability to conduct more accurate tax compliance risk analysis.
  • RTR will also give Revenue the ability to identify potential weaknesses arising from payroll adjustments. This may increase the likelihood of selection as part of Revenue’s compliance.

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