Simple Note on PAYE Modernisation
As you will be aware, there are changes happening in 2019 in relation to payroll processing for your company. You will no doubt have received various messages or heard about PAYE Modernisation.
If you outsource your payroll function, the practicality of the new process will be looked after by your provider however, there are matters you should be aware of (for example the impact of paying in arrears on staff credits mentioned below). Please ensure you are familiar (as an employer) with the transition issues your business may face with the operation of this new system.
Revenue are doing an overhaul of their system beginning January 2019. There will be no more P forms (P60s or P45s etc) and in simple terms, you will be processing a mini P35 each month when processing your payroll.
You will still be processing payroll as normal until 31 December 2018 and there is still a requirement for filing of the P35 as usual in February 2019.
As you may be aware any payroll automated systems you use will be updated for these new changes. If you have not seen an update by your payroll provider, now is the time to check when the new software will be available.
There will be items you MUST be aware of. I believe one of the biggest changes will be ‘timing’ of payrolls. You would most likely normally run a payroll before your staff members are paid. In some scenarios business owners may have paid their staff before they processed payroll. This can NO LONGER happen. Revenue require the payroll to be processed and submitted to them PRIOR to funds being made available to staff.
There will be no change in relation to the payment of taxes each month (what was the P30) – payment will still be due the 23rd of the following month if you file online. If you file and pay quarterly P30’s at present, this payment date will remain the same.
Having a correct PPS number for all staff members will now be a priority. There is a PPSN checker now on the ROS website for any staff member you take on. The new ‘emergency tax’ system is more punitive for staff so not having a PPS number for payroll should ideally not happen.
Your staff may change the allocation of their tax credits from month to month and as always, I recommend never agreeing to pay any staff member a ‘net’ amount and working out the tax afterwards. If credits are changed by a staff member (for example allocating them to a spouse), your business would potentially face a larger cost than expected.
For any client that pays staff in arrears, if payments are being made from your bank account in January 2019 for work performed in December 2018, this will now be included in a 2019 payroll under the new system. Therefore, staff may miss out on their use of December tax credits. If this will apply to your business, a December payroll can be run before year end to avoid this issue. This may also affect staff PRSI contributions for 2018 so please review this.
There are many more issues that will come to light as you begin processing payrolls under the new system however, Revenue are being very proactive in assisting and providing support and no doubt your payroll software provider will also.
From a staff point of view, your staff members will have access to their records with Revenue by about April (Revenue estimate). This means they can see the contributions paid by employers that will match their payslips.
WHY THE NEED FOR CHANGE?
There were times when some employers collected taxes from employees, however these amounts weren’t paid over to Revenue. When an employee checked their contributions for example, they found out too late, they were not paid. These rogue employers are one of the main reasons for these changes being made. From an employee point of view these changes are very beneficial.
In time, from an employer point of view, I believe this will be a hugely positive change. There will be less forms and filings and the filings made should be accurate and made on a timely basis.
If any employers were used to ‘fixing’ up payrolls at the end of the year before now, there will no longer be this opportunity. The processing each month is like a mini P35. There will be NO year-end P35 for 31 December 2019 .
For any employers using manual systems, this may be cumbersome. Revenue estimate there are about 50,000 employers using manual systems at the moment. If you are currently manually processing payroll, it could be an opportune time to review the payroll packages available. The cost on a per hour basis of your time would work out efficient in terms of value for money with some of the packages available.
When you have the updated your payroll software, I’m sure you will be running internal testing on your payroll. Any technical issues will be dealt with by the payroll software company. I would encourage you to find out when your update for 2019 is expected and run a test payroll as soon as you can.
If you have any questions in general or queries about PAYE Modernisation, please check out the link from Revenue here.
No doubt if you have queries, you will also contact your accountant. Many of my colleagues are working to Income Tax deadlines (next week) and like myself, will be digging deeper into this by early December.
Let’s jump into 2019 prepared!
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