What is PAYE Modernisation?
In short, PAYE Modernisation is the modification of the current Pay As You Earn (PAYE) system. It means every time a business runs a payroll, they will be required to submit their pay, tax and other deductions, as well as details of employees starting and leaving the business to Revenue.
PAYE Modernisation will allow for real time communication between businesses and Revenue that relates to employee pay and tax deductions. By operating in real-time, Revenue can ensure that the correct tax deduction is being made at the right time for every employee.
PAYE Modernisation will be effective from 1 January 2019.
Why is it being introduced?
The current PAYE system was introduced in the 60’s and times have changed but the system hasn’t. People are moving jobs more regularly and changes in personal circumstances such as marital status are more common. On top of this, modern IT and software systems provide the opportunity for greater accuracy and real time communication.
A similar concept has already successfully been rolled out in the UK, called Real Time Information or RTI.
What does it mean for your business and your employees?
The introduction of PAYE Modernisation will bring significant changes and benefits to your current payroll processes, including:
- P35 submissions will be replaced with a submission file returned to Revenue after every payroll run
- P30s, P45s, P46s, and P60s will be abolished
- New facilities for in year and out of year amendments/corrections
- P2C process replaced with a direct link from Revenue to payroll software
- Time and cost savings as PAYE submissions become more efficient
Ultimately, businesses will need to focus heavily on the quality and accuracy of the data they provide to Revenue on each payday, so that the right tax is paid in the correct pay period, without delays.
Under PAYE Modernisation your employees will be able to access their pay and tax record with Revenue online, which will be regularly updated throughout the year as they are paid. Plus, with the abolishment of P60s employees will be entitled to an end of year pay and deduction Statement. PAYE Modernisation gives them the certainty that they are not over or underpaying tax.
How will it affect how I calculate PAYE?
PAYE Modernisation doesn’t change the way your business calculates PAYE, it just means regular submissions to Revenue are required. For those with experience of UK Payroll, it’s a similar concept to Real Time Information (RTI) where employers are obliged to file payroll returns electronically for each payroll run.
What are the benefits?
It is believed that PAYE Modernisation will, in the long run, streamline reporting obligations to Revenue, making PAYE submissions more efficient and reducing the administrative burden for all businesses.
What happens for non-compliance?
Although it’s anticipated that Revenue will take a practical approach when it comes to penalties, non-compliant businesses can expect Revenue intervention. More information on penalties will be confirmed in the coming months.
Key dates to remember for PAYE Modernisation
PAYE Modernisation will go live in January 2019. Other key dates to note are:
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