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This article was first published in the November/December 2018 Ireland edition of Accounting and Business magazine.

The move to real-time PAYE will transform the administration and collection of payroll taxes, and bring very significant efficiencies and improvements in accuracy and transparency for Revenue, employers and employees. However, the change of PAYE reporting from its current yearly basis to real-time is a fundamental adjustment, and with 1 January fast approaching, employers and their agents should act now to ensure they can meet their new reporting obligations.

Following the announcement of its PAYE modernisation project in October 2016, Revenue launched a public consultation process. The report on that consultation was published last year and is available at www.revenue.ie/pmod176.

The Finance Act 2017 gave legal effect to the move to real-time PAYE reporting. The reform of the system will reduce the administrative burden on employers and their agents, and will ensure that employee tax deductions and contributions are correct, and are reported to Revenue on time.

Full engagement

Revenue has taken a co-design approach with the new system, engaging extensively with payroll professionals, tax practitioners, accountancy bodies, business representative organisations and payroll software developers. The objective is that real-time PAYE reporting will seamlessly integrate into the payroll system, bringing significant streamlining of business processes and a reduction in administrative burden and costs.

From the start of next year, the following changes will be in force: employers will report to Revenue in real time; Revenue will have the most up-to-date information possible to ensure that each employee is subject to the right tax deductions; and employees will have full visibility of the data reported to Revenue.

Changes for employers

Real-time PAYE will reduce the administrative burden by eliminating the need to file forms P30, P35, P45, P46 and employers’ obligation to produce a P60 for every employee each year. Employers will need to change their current payroll practices, though, some of which are based on an end-of-year reporting obligation. In particular, they will need to focus closely on the quality and accuracy of the data they provide to Revenue on each pay day.

From 1 January 2019, employers will report to Revenue all employees’ pay, tax and other statutory deductions, as well as details of any employees leaving their employment and new employees joining. Employers will supply this information to Revenue at the same time they pay their employees.

Every month, Revenue will provide employers with a statement listing the total deductions made on behalf of all their employees in that month; this will become their return. If an employer disagrees with the statement, they will be able to update the associated payroll records and Revenue will issue an amended statement.

Employers will no longer have an end-of-year compliance (P35) requirement. Instead, there will be 12 returns based on the payroll data they submit each month. There is no change to current payment due dates.

Integrating and simplifying PAYE processes will provide increased confidence in the accuracy of the data and prevent costly and time-consuming errors. It should also reduce unnecessary contacts between employer and employees (for example, where there has been an incorrect tax deduction).

Changes for employees

The new system will allow employees to manage their tax affairs quickly and easily. They will no longer be issued with a P60 by their employer each year. Revenue will provide employees with an end-of-year statement showing their pay and deductions.

With real-time PAYE, Revenue’s regular reconciliations will be based on an employee’s actual pay and tax details. This will ensure that employees get the full benefit of their tax credits and rate bands across employments throughout the year, even if they have more than one employment. Under the current system, some individuals have had to wait until after year end for any refund or even been faced with a tax underpayment at year end.

Employees will have up-to-date information on the calculation of their tax deductions and the option to make necessary changes online, in real time, using Revenue’s myAccount service.

The new PAYE system will also provide transparency. Individuals will be able to confirm, through myAccount, that their tax deductions have been correctly and fully reported to Revenue.

The time to act is now

The introduction of the new system will require employers, agents and payroll providers to review their current payroll processes and practices to ensure that they are in a position to comply with the new requirements.

The transition to a real-time PAYE system on 1 January 2019 represents an important step in Revenue’s process of continuous improvement in service, compliance and efficiency in the administration of the tax system. There is a wide range of additional PAYE information available on the Revenue website.

Sinead Sweeney, PAYE modernisation change manager, Office of the Revenue Commissioners