Are you ready for PAYE Modernisation?

From 1 January 2019 Revenue will be rolling out a new real-time system which will completely change the way PAYE currently operates. The importance of understanding and correctly adopting the new system cannot be underestimated as non-compliance or continuous errors will likely result in Revenue intervention.

What is the aim of the new system?

  • Improve the streamlining of current business processes
  • Reduce the administrative burden currently experienced by employers to meet their PAYE reporting obligations.
  • Ensure Revenue, employers and employees have the most accurate, up to date information relating to pay and statutory payroll deductions so that the right amount of tax is being deducted at the right time from the right employees.

What is changing?

  1. Employers will have to report payroll information to Revenue on or before making a payment to an employee.
  2. P60s, P45s, P30s, P35s and End of Year Returns will be abolished.
  3. The current tax credit certificate (P2C) is being replaced by a Revenue Payroll Notification (RPN) which will provide employers with all necessary information regarding tax credits and cut-off.
  4. An “Employment Identifier” will be used to distinguish between multiple employments of an employee with the same employer and different periods of employment with the same employer.
  5. An “Employer Reference Number” must be reported to Revenue for every payment made to an employee who has not provided a PPSN.
  6. Revenue will issue monthly statements to employers which will show a summary of total liability.

Getting PAYE Modernisation ready!

Employers should: –

  1. Register all their employees with Revenue
  2. Have the right PPS numbers for all employees
  3. Have up to date tax credit certificates for all employees
  4. Complete the P45 process for any employees no longer employed with them
  5. Have adequate controls in place to ensure benefits/notional pay are being accurately calculated during the year
  6. Have their ROS digital certificate ready for the 1 January 2019.

Anything else to note?

  1. It is not recommended to have a net pay arrangement with employees. We have no option but to use the credits and cut off provided to us by Revenue, and therefore employers with net pay arrangements can be exposed to an additional liability due to reallocation of credits by the employee.
  2. Grossing up of drawings to repay overdrawn directors’ loans will result in us having to amend prior periods rather than filing a supplementary return (which previously was the option selected) and will inevitably increase the risk of interest and penalties on late filing plus will draw attention to the BIK that was deemed to be provided to the director when they received the interest free loan.

If you have any queries or concerns with respect to the new PAYE Modernisation system, or should you require assistance with your payroll, then please call us on 021-4810035.

 

Budget 2019 – An Overview

The Minister for Finance & Public Expenditure and Reform Paschal Donohoe delivered the budget for 2019 on the 9 October 2018. Some changes became effective almost immediately while others won’t come into effect until next year.

Some of the main points are as follows: –

  • The Department of Health will see an increase of a billion euro to the health budget.
  • The Government is to allocate €2.3 billion to tackle the housing crisis in Ireland.
  • The inheritance tax limit has been increased to €320,000 between parents and their children.
  • For self-employed persons, earned income tax credit will be increased to €1,350.
  • Increased capital allowances for employer provided fitness and childcare facilities effective from 1 January 2019
  • The National Training Fund Levy payable by employers will see an increase to 0.9% from 1 January 2019.
  • Tax relief for start-up companies will be extended until the end of 2021
  • Minimum wage will increase to €9.80 per hour from 1 January 2019
  • A new scheme to provide 2 weeks paid parental leave in the child’s first year will be introduced in November 2019.
  • Decreased rate of Universal Social Charge (USC) from 4.75% to 4.50%
  • A Future Growth Loan Scheme for SMEs and the agriculture and food sector is being launched providing up to €300m.
  • A new Anti-Tax Avoidance Directive (ATAD) at a rate of 12.5% was introduced. This tax arises where a company attempts to avoid Irish tax by migrating or transferring assets offshore
  • Mortgage interest relief for landlords will rise to 100% from 1 January 2019
  • Overseas aid will increase by almost €110m
  • As from midnight 9 October 2018 the price of a 20 pack of cigarettes increased by 50c.
  • Around €710 million will be put aside for Brexit-related measures.
  • The Christmas payment will be paid to all social welfare recipients in 2018 and from March 2019 social welfare payments will increase by €5 per week.

See our brochure for even more Budget 2019 details

Redundancy Basics

Redundancy may arise in certain circumstances, such as when the employer ceases to carry on the business for which the employee was employed. It is important to note that when a redundancy occurs that it is the job that is being made redundant and not the employee. That being the case an employer cannot just “legally” dismiss an employee by reason of redundancy. If an employer were to make an employee redundant and then employ a new employee to carry out the same role then this would be deemed to be an unfair dismissal of the first employee.

Where there are a number of employees carrying out the same role and the employer needs to reduce their workforce then the employer should be mindful of the redundancy selection process. If the employer deviates from an agreed procedure or a procedure previously applied when deciding who is to be made redundant, then this may be deemed to be an unfair dismissal.

Before making any employee redundant the employer should consult with the employees at risk of the redundancy. An employer should also consider if there are any options other than redundancy, for example, if the decision to make someone redundant is on the basis of economics, the employer should consider suggestions by employees for pay cuts or for job sharing.

With regard to redundancy payments the statutory minimum is 2 weeks’ pay for each completed year of service and an extra week, all capped at €600 per week. In order for an employee to be entitled to the statutory redundancy payment they must have at least 2 years continuous employment with the employer.

The statutory lump sum is tax free. Any payment above the lump sum (known as an ex-gratia payment) is taxable subject to any tax-free entitlements.

National Minimum Wage Set to Increase in January 2019

The Low Pay Commission’s recommendation to increase the national minimum wage has recently been accepted by the Cabinet. The Low Pay Commission was established in 2015 by the Fine Gael/Labour coalition to advise the Government on the appropriate rate for the national minimum wage. The recently accepted recommendation will see the Irish National Minimum Wage increase from €9.55 to €9.80 per hour. The increase is expected to be effective from January 2019.

For the purposes of the National Minimum Wage Act, the following are regarded as wages: –

  • normal basic pay
  • shift allowances or other similar payments
  • any fee, bonus or commission
  • any holiday, sick or maternity pay
  • any other return or payment for work (whether made under the contract of employment or otherwise),
  • any sum payable to an employee in lieu of notice of termination of employment.

It should be noted that in some sectors minimum wage rates differ and these are set out in Employment Regulation Orders (EROs) made by Joint Labour Committees. Different sectors include the security industry and contract cleaners.

Ready for PAYE Modernisation?

Revenue are in the process of reforming the current PAYE system. From 1 January 2019 Revenue will be rolling out the new real-time system. Employers, agents and payroll providers will need to review their business processes and practices so they meet the new requirements.

The aim of PAYE modernisation is to:

  • Improve the streamlining of current business processes
  • Reduce the administrative burden currently experienced by employers to meet their PAYE reporting obligations.
  • Ensure Revenue, employers and employees have the most accurate, up to date information relating to pay and statutory payroll deductions

With the new system employees will be able to log into their Revenue account and view information submitted by their employer. Other changes will include payroll software automatically updating changes to P2c files regarding tax credits and cut-off, and automatically uploading data to Revenue. The new system will also see the abolition of P60s, P45s, P30s and P35 forms. Revenue are also reviewing options to deal with the taxation of Illness Benefit which would remove the obligation for an employer to tax it through payroll. 

It will be important for employers to ensure payroll is updated every week or month as the file will be automatically uploaded to Revenue, and non-compliance or continues errors will likely result in Revenue intervention.

To prepare for PAYE modernisation, employers should ensure they have registered all of their employees, received an up to date Tax Credit Certificate (P2C) for each employee and check they have the correct PPSN for all employees. Employers are required to submit a list of employees to Revenue through the Revenue Online Service (ROS). Revenue have published a manual to provide guidance on how to complete and submit the employee list.

Need a Loan to Survive Brexit?

If you own a small or medium sized enterprise and are worried about the impact Brexit will have on your business, then you may be eligible to avail of a loan from certain financial institutions.

The SBCI (Strategic Banking Corporation of Ireland) Brexit Loan Scheme is available to viable micro, small and medium sized enterprises (SMEs) and Small MidCap enterprises that meet certain eligibility criteria. Loan applications can now be made to participating banks, which includes AIB, Bank of Ireland and Ulster Bank. The Scheme will operate until March 2020, or until it has been fully subscribed.

The purpose of the Scheme is to support Irish SME’s/enterprises, allowing eligible businesses to use loans for future working capital requirements and to fund innovation, change or adaptation of the business to mitigate the impact of Brexit.

The Scheme is offered in partnership with the Department of Business Enterprise and Innovation and the Department of Agriculture Food and the Marine, and is supported by the InnovFin SME Guarantee Facility, with the financial backing of the European Union under Horizon 2020 Financial Instruments.

For more information visit: https://sbci.gov.ie/brexit-loan-scheme