PAYE Modernisation

PAYE Modernisation

If that doesn’t sound scary then I don’t know what does. According to it is ‘the most significant reform of the PAYE system since its introduction in 1960’.

When the PAYE system was set up initially it was with the idea that most people had a ‘job for life’. Nowadays however, employment is much more dynamic. Some people change jobs on a yearly basis, allowances for married couples have changed due to the rise in divorce and separation or many people have several jobs at once. The workforce has become a whole lot more complicated in 2018 in comparison to 1960!

But what does that mean for you?

It means that your employers will now have to report your taxes deducted and any other deductions made to your pay, every time the company runs their payroll, whether that be weekly, bimonthly or monthly, rather than the current system of once a year during the Payroll Year End. Traditional methods of reporting these deductions such as P30, P35 and P45 will no longer exist. You will be sent an online statement before the beginning of the tax year outlining your tax credits and Standard Rate Cut Off Point. This is based on estimations received by Revenue. You will then be asked to make any changes to entitlements or adjustments that are needed. This means you don’t have to wait until the end of the year to apply for a tax refund or find out you’ve underpaid your taxes and owe Revenue money – which is never fun!

The amount of PAYE you pay will not be affected. It’s simply regular reporting of your deductions by your employers to Revenue.

Revenue want you to remember SMART PAYE for employees:

Simplified online services

Maximise use of entitlements

Automatic end of year review

Real time accurate data


This will come into effect for all employers on January 1st 2019.

How does this effect you if you’re in charge of payroll?

Well, it means that you will have to report your employee’s earnings in real time (Real Time Reporting RTR). The hope of this is that it will reduce the administrative burden to reach reporting obligations for employees PAYE. It is similar to what you are currently doing with the annual P35.

If you’re using Payroll software, the additional work involved will be minimal as it will be integrated into the system. However, if you’re a smaller company not using Payroll software then the work will be time consuming and stressful to begin with – whilst you figure everything out!

What’s important to note is that this won’t affect your cash flow. You’ll still be forwarding the tax to Revenue during the year, it is just reporting that information to Revenue will be a lot more streamlined and regular.

Revenue want you to remember SMART PAYE for employers:

Seamless integration into Payroll

Minimise employer cost to comply

Abolition of P30s, P35s, P45s, P60s and end of year returns

Right tax paid on current due dates

Time Savings

Are you ready?

Have you the correct information for all employees?

Make sure first and last names are spelt correctly and that the address that they have given you is correct!

Will your Payroll software support PAYE modernisation?

If you’re one of the lucky ones that uses Payroll software, make sure that it will be compatible with PAYE modernisation. Don’t assume on January 1st that the system will automatically know what to do.

Revenue have released the following checklist to make sure you are ready for January 1st 2019.

You can find a link to it here but we’ll also post it below!

Are you registered as an employer?

Use eRegistration on ROS

Have you the right Personal Public Service (PPS) number for all your employees?

Take reasonable steps to verify the PPS number provided by your employee. For example check against:

• Public Services Card

• Tax Credit Certificate from a previous employment

• P45

• P60

• Any item of correspondence from Revenue quoting the PPS number.

If an employee does not hold a PPS number, advise them to contact the Department of Social Protection to apply for one.

Have you registered your employees with Revenue?

When a new employee starts working with you, you should either submit the P45(3) provided to you by that employee from his / her last job or, where the employee does not have a P45, use the P46 process to register the employment. If your new employee has not worked in Ireland before, you should advise that employee to enter the details of the job online through the Jobs and Pensions service in MyAccount. The employee will need to register for MyAccount to use the Jobs and Pensions service. Revenue will then issue you a tax credit certificate for that employee advising you of the correct tax to deduct from his / her pay.

Have you completed the P45 process for any employees who have stopped working for you?

When an employee stops working for you, you should complete the Form P45 and submit it to Revenue. This can be done through ROS.

Have you an up-to-date tax credit certificate for all your employees?

In December of each year employers are notified by Revenue of the tax credits and standard rate cut-off point for the coming year for each employee. If, on the first pay day of the new tax year, you have not received a tax credit certificate for the new tax year for an employee, a number of options are available:

• Where the cumulative basis of tax deduction is in operation, you should use the multi-year certificate received in a previous year provided it has the employer’s name on it.

• Where the non-cumulative basis (week 1 / month 1 basis) is in operation, you should use the tax credits and standard rate cut-off point, as advised in the previous year’s non-cumulative tax credit certificate.

• Where the temporary basis of tax deduction is in operation, you can continue to use, on a temporary basis, the tax credits and standard rate cut-off point as advised on the P45, provided the P45 relates to the current year or previous year. Otherwise the emergency basis of tax deduction will apply from 1 January until a notification is received.

• Where the emergency basis of tax deduction is in operation, you should continue to use the emergency basis on a cumulative basis.

Are you aware of your duties as an employer at the end of the year?

At the end of the year, you should:

• Ensure that a PAYE / PRSI record is set up for each employee for the coming income tax year

• Deal with “week 53” and similar cases if there is a pay day on 31 December (or in a leap year on 30 or 31 December)

• Complete employees’ PAYE / PRSI records for the year

• Complete and send end-of-year returns to Revenue

• Give a Form P60 to each employee.

Our most important tip we’ll leave you with is start getting ready now!

As of writing this post you have 341 days to prepare. Don’t leave it until June thinking ‘Oh, we have 6 months to get ready!’. Do you know how many people are on holidays during that 4 month period? Nothing will get done! Don’t leave it until October/November as everyone is getting ready for the year end and not thinking about next year!

Don’t forget, if you need any assistance in getting ready for the switch or just want to clarify a few things, we are here to help! Contact us for help!