PAYE Modernisation: What it means for your payroll

Real-time reporting has changed the Pay As You Earn (PAYE) system in Ireland. But what does PAYE Modernisation mean for your business and your payroll?

Read this article for an overview of the most important transformation of the PAYE system since it first began, discover why it was introduced, and find out what it means for your business and your employees.

What is PAYE Modernisation?

PAYE Modernisation is the modification of the PAYE system. It means every time a business runs payroll, it will be required to submit pay, tax and other deductions, as well as details of employees starting and leaving the business to Revenue.

It allows for real-time communication between businesses and Revenue that relates to employee pay and tax deductions.

By operating in real time, Revenue can ensure the correct tax deduction is being made at the right time for every employee.

PAYE Modernisation was effective from 1 January 2019.

Why was it introduced?

The previous PAYE system was introduced in the 1960s and times have changed but the system hadn’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 (Real Time Information or RTI) was successfully been rolled out in the UK a few years ago.

What does it mean for your business and your employees?

PAYE Modernisation brings significant changes and benefits to payroll processes, such as payroll year end, and includes the following:

• P35 submissions have been replaced with a submission file returned to Revenue after every payroll run
• P30s, P45s, P46s, and P60s have been abolished
• New facilities for in year and out of year amendments/corrections
• The P2C process has been replaced with a direct link from Revenue to payroll software
• Time and cost savings, as PAYE submissions become more efficient

Ultimately, businesses have to focus on the quality and accuracy of the data they provide to Revenue on each payday, so the right tax is paid in the correct pay period, without delays.

Under PAYE Modernisation, your employees can 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 are 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 does 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.

If you have experience of payroll in the UK, 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?

In the long run, PAYE Modernisation should 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.

PAYE Modernisation submissions

However you manage your payroll, it’s important to make sure your PAYE Modernisation submissions are done correctly. This is the case whether you’re outsourcing your payroll or doing it in-house.

Outsourcing

Outsourcing your payroll? Be aware that PAYE Modernisation submissions are still your responsibility.

Check with your payroll provider to see how they’re complying with PAYE Modernisation and if any changes are required for your business.

Managing payroll in-house

It’s essential that you make sure your business is using payroll software that is compliant with the support you require to submit PAYE in real time.

If you’re unsure, check with your payroll software provider and ask them about PAYE Modernisation.