Your PAYE Modernisation questions answered

The biggest issue facing employers at the moment is the new “real-time” reporting regime, known as PAYE Modernisation, for PAYE that went live on 1 January 2019. From this date, you must make a submission to Revenue on or before making a payment to an employee.

After the end of each calendar month, Revenue will issue a statement based on submissions received, which sets out the tax due for the period. The statement is deemed a statutory return by the 14th day after month end.

Where errors are made, there is scope to amend the statement in advance of the 14th day of the following month. Payroll taxes are then remitted to Revenue by the 23rd day of the following month.

The P35 filing will also no longer be required – the reporting process must be correct for each pay period, otherwise penalties may apply.

If not already done so, employers should immediately review their payroll procedures to ensure that accurate information is provided on a timely basis. It is important to have all stakeholders involved so they understand the need for improved processes.

How does this effect benefits-in-kind and notional payments?

Revenue has advised that benefits-in-kind (BIK) and other notional payments should be reported by:

a) The day the BIK or notional payment is made; or
b) The earlier of the next pay day or 31 December in the year.

A “best estimate” of the taxable value should be included in the next payroll submission after the benefit/notional payment is provided. When the actual value becomes known, an adjustment is to be processed in the following payroll submission. Revenue expect these items to be reviewed regularly – at least quarterly – with adjustments processed in the next payroll submission.

Does this also apply to taxable expenses?

Revenue has advised that a payroll submission is required on or before any taxable cash payment is made to employees. Many employers reimburse employees for items that, while allowable under the company expense policy, are taxable. To date, these items are generally picked up through retrospective reviews throughout the year and before the P35 is filed. This type of catch up exercise will no longer be possible.
Employers should review internal processes to ensure taxable expenses can be identified in advance of reimbursing employees. Further complexities may arise where expenses are reimbursed by the Accounts Payable department or off-payroll-cycle as additional payroll submissions may be required.

What about company credit cards?

Revenue has confirmed that the use of company credit cards are considered notional payments with the benefit being provided at the date the credit card is used (and not when the credit card bill is settled). Such items should be included in a payroll submission and reported to Revenue by:

a) The day the benefit is provided; or
b) The earlier of the next pay day or 31 December in the year.

This may create practical difficulties for employers in determining what items are reportable each period as you may not have oversight of the taxable expenses incurred until a later date when the employee submits expense details.

What will happen if my organisation isn’t compliant?

The current penalty regime provides for a €4,000 fixed penalty for each breach of the PAYE regulation. There is also provision for a €3,000 fixed penalty imposed on the company secretary for each breach. These penalties can be imposed on a per-item basis, so if you are even a mid-size level employer, these penalties can mount up.

While Revenue have stated that the penalty and self-correction regimes are under review, it is hoped that penalties would only be enforced for significant breaches and only in situations displaying evidence of deliberate behaviour.  However, as things stand, they could be applied to any correction of, or omission from, a payroll submission.

Colin Forbes is a Tax Partner of Global Employer Services in Deloitte.