Getting started with payroll in 2021 (Sponsored)

Jan 15, 2021

By Jason Collins, Founder and Chief Executive at CollSoft.

Reporting the correct payment date to Revenue

One of the key requirements under PAYE Modernisation is to report all payments made to employees on or before the date of payment to Revenue.

Many employers are reporting in advance of making payments as required, but the dates that they are reporting are not the actual dates on which the payment is being made.

This is particularly important in 2021 because of the way that the Revenue calendar falls. A payment made on Thursday 7 January is a Week 1 payment whereas a payment made on the Friday 8 January is a Week 2 payment.

From a Revenue perspective, the only thing that matters is the date that the employee is paid – not when they earned that payment. Many employers operate their payroll on the basis of the date the employee worked rather than the date they are paid which means that, in many cases, employers are not reporting their wages correctly to Revenue.

The beginning of a new tax year is an ideal time for an employer to re-align their payroll calendar with Revenue’s.

Employees preliminary end-of-year statement now available

Employees are now able to request their preliminary end-of-year statement for 2020 via their Revenue MyAccount.

These preliminary statements will calculate any PAYE and USC liability that employees may have as a result of payments received under the Temporary Wage Subsidy Scheme or the Pandemic Unemployment Payment.

Revenue have confirmed that while employees can now fully or partially pay this liability using RevPay in their Revenue MyAccount, they also have the option to allow Revenue to collect this liability interest free by reduction of their tax credits over a four year period beginning in January 2022.

Revenue have published detailed statistics on their website showing the impact of the Temporary Wage Subsidy Scheme (TWSS) and the Pandemic Unemployment Payment (PUP) on employees year-end liabilities at Preliminary End of Year Statements (PEOYS) Statistics.

Employers will be able to make payments towards an employees 2020 tax liability

Revenue will facilitate employers who wish to make a contribution towards employees' 2020 tax liabilities that have arisen due to the payment of TWSS in 2020.

Revenue will not apply the usual benefit-in-kind (BIK) rules to these payments but employers should be aware that these payments would not be regarded as wholly and exclusively incurred for the purposes of the employer’s trade or profession, and therefore they will not receive a deduction for corporation tax purposes.

If employers wish to make a payment towards their employee's 2020 tax liability, they will need to engage directly with the employee in order to determine the amount of PAYE and USC that is being paid. The preliminary end of year statement will help in this regard.

There are two methods by which the employer can make a payment towards the employee's tax liability:

  1. Make a payment directly to the employee. the employee must then pay their tax liability using RevPay in myAccount.
    -or-
  2. The employer can amend their last 2020 payroll submission to report the amount of PAYE and USC being paid. This will trigger a revised monthly statement for December and the money will be collected by Revenue in the normal manner.

Employers will have until the end of June 2021 to avail of this facility and they will be required to keep some documentary proof showing the engagement with the employee and the arrangements agreed in order to undertake these payments.

More information is available on the Revenue website here.

BIK on company vehicles during the current Level 5 lockdown

In March 2020, Revenue introduced a short-term concessionary measure in relation to the operation of benefit-in-kind (BIK) on employer-provided vehicles having regard to the unprecedented situation arising as a result of the COVID-19 pandemic.

The concessionary treatment applicable to BIK on employer-provided vehicles, along with all other COVID-19 related measures, is kept under regular review by Revenue. In early December 2020, and as the public health restriction at the time began to ease and businesses reopen, Revenue confirmed that the concessionary measure related to employer-provided vehicles would cease to apply on 31 December 2020 and, with effect from 1 January 2021, BIK on same should be calculated in the usual manner.

However, since then, Level 5 public health restrictions have been subsequently introduced. On 24 December 2020, all restaurants, cafés and gastro pubs as well as personal services, such as hairdressers, beauticians and barbers closed, while hotels, guesthouses and B&Bs remain open but are restricted to essential non-social and non-tourist services only. Additionally, on 31 December, all non-essential retail as well as gyms, leisure centres and swimming pools closed. For employees, the public health advice is to work from home in all instances unless work is an essential health, social care or other essential service that cannot be done from home.

Having regard to the current public health restrictions, the short-term concessionary measures announced back in March will remain in place. This means that:

  • where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period.
  • where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use.
  • Records should be maintained to show that the employer has prohibited its use and no such use has occurred. For example, communication from the employer, photographic evidence of odometer, etc. 
  • where an employee has a car provided by his or her employer and: 
    • the circumstances in the previous example don’t apply.
    • a limited or reduced business mileage (if any) is undertaken due to the COVID-19 crisis; and
    • personal use is limited.

The amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due. Thus, the percentage applied in the calculation of the cash equivalent, which is based on annualised business mileage, may have regard to the actual business mileage for January 2020 for the current period of the COVID-19 restrictions. Appropriate records should be kept. For example, business mileage travelled in January, amount of private use, photographic evidence of odometer, etc.

Due to the nature of the Covid-19 pandemic it is not known how long any COVID-19 restrictions will ultimately remain in place. Revenue will, however, continue to regularly review all COVID-19-related matters (including the provisions relating to BIK on employer-provided vehicles) and, if any further measures are considered necessary in the future, updated guidance will be made available by Revenue in relation to same as soon as possible.

There are other concessions where an end date of 31 December was attached just prior to most recent Level 5 lockdown and these are under review. 

(This article is sponsored by CollSoft Payroll. Please note that although the information above is correct at the time of writing, circumstances may change. It is therefore advisable to seek professional advice on such issues.)