Pay As You Earn (“PAYE”) Modernisation - Revenue Report on Public Consultation Process.
Real time PAYE reporting. What's coming down the line?
In his October 2016 Budget statement, the Minister for Finance announced the launch of a consultation process regarding the modernisation of the PAYE system. Since the project commenced, Irish Revenue have engaged with a number of key stakeholders in an effort to obtain input from those who will be most impacted by the introduction of the PAYE Modernisation system. Deloitte has been to the forefront of this engagement with Government and the Irish Revenue and, as part of our representations, we have leveraged our experience of similar changes that have been introduced in various jurisdictions. While the initial consultation process has concluded Revenue have indicated that they will continue to obtain feedback throughout the design phase from a broad range of interest parties to include tax agents, employers and software providers alike.
Earlier this month Revenue published the “Report on Public Consultation Process” (the “Report”) which effectively provided a summary of the main issues which were identified by the various interest parties. In total Revenue received 77 responses from a broad range of industry experts, including accountants (11), employers (26), payroll agents (15) and payroll software developers (7).
Timeline for Implementation
Revenue have confirmed the following timelines:
- 1 January 2019 is the launch date for the modernised PAYE system
- By the end of June 2017 the employer submission data requirements will be published to allow software providers develop systems to complement real time reporting
- By the end of March 2018 The Public Interface Test facility will be introduced which will provide a nine month testing window before a full roll out in January 2019
A summary of the issues/queries are as follows:
- Increased administrative burden for employers
- Information and Communications Technology (ICT) – related issues
- Operation of Payroll
- Corrections to Payroll
- Timing of employer submissions to Revenue
- Department of Social Protection payments and Pay Related Social Insurance (“PRSI”)
- Other charges/contributions and non-PAYE income
- International Comparisons
Revenue responses and other important confirmations which were contained in the Report have been set out below.
Increased administrative burden for employers
A considerable amount of feedback was received during the consultation process which indicated that the new modernised system and introduction of real time reporting would increase the administration burden and costs of compliance particularly for smaller employers (i.e. those with less than 5 employees) who may not necessarily have software systems in place to allow for real time reporting.
Revenue believe however, that streamlining employer reporting obligations to Revenue with current payroll processes will bring efficiencies and reduce the administrative burden for all employers in the long run. Revenue are committed to implementing a user-friendly system for all employers. It is anticipated the new reporting process will be integrated into the employer’s normal payroll run. Revenue have confirmed that they will facilitate other online mechanisms to allow users to submit data where software is not synchronised to Revenue’s Online Service (“ROS”). In addition, there will be a simple data capture mechanism provided to allow employers to report payments where payroll software is not being used or where payments are made outside the payroll software.
Revenue have also confirmed their intention to abolish the requirements to file Forms P30, P45, P35 and generation of Forms P60.
Revenue have also outlined that for employers who currently operate monthly direct debits for PAYE payments, Revenue will provide a simple data capture mechanism for this data to make it easy for these employers to meet their reporting obligations.
Technology related issues
In recognition of technology issues, Revenue is working to make it as easy as possible for employers to comply with real time reporting requirements. Revenue are of the view that the introduction of a Public Interface Test environment will be sized to allow full scale testing and will be supported by a team of technical and business support staff who will work with the software providers to ensure technology issues are mitigated following the introduction of the modernised PAYE system.
Operation of Payroll and timing
In response to feedback particularly concerning the delays and difficulties in receiving PPS numbers for both Irish and non-Irish national employees, the Department of Social Protection will be collaborating with Revenue during the design phase of PAYE Modernisation. The intention will be to allow for PPS numbers to be obtained in a more time effective manner. Revenue recognises that for some employers the focus on end of year reporting may have contributed to in year payroll practices that are not fully in line with PAYE regulations. The real time reporting regime will make these visible and such practices will need to change.
Corrections to Payroll
Revenue have confirmed they will set out a proposed approach to deal with payroll corrections. In all relevant circumstances, the correction system will be seamlessly integrated into the payroll process, with a facility in place to allow employers to view the data received by Revenue. Revenue have committed to work closely with payroll operators and tax agents to ensure employer submissions in respect of internationally mobile employees and employees in receipt of additional non pay based remuneration are also considered during the design process.
Timing of employer submissions to Revenue
Revenue have confirmed there is no intention to change the due dates for employers to pay over the tax deductions and contributions to Revenue. Employer taxes will remain payable on the 23rd of the month following payment, whereas the timing of employer submissions will be reported in line with payroll processes. Revenue will calculate the taxes payable based on the information provided in the employer submission and the employer will have until the 23rd to pay over the taxes or amend the amounts submitted where required.
Department of Social Protection payments and PRSI
Revenue have confirmed they will be working closely with the Department of Social Protection to reduce the administrative burden associated with the taxation of illness benefit and other social welfare payments.
Other charges/contributions and non-PAYE income
Revenue is committed to simplify the income tax system for both employers and employees alike. Consideration will be given to incorporating small amounts of non-PAYE income into the PAYE system and simplifying the reporting processes for employees in receipt of non-PAYE income.
Revenue have also outlined the main differences between the proposed PAYE Modernisation system and that which was implemented by Her Majesty’s Revenue and Customs (“HMRC”) under Real Time Information (“RTI”) in 2013. HMRC’s focus was on employer reporting of PAYE in real time. Revenue are seeking to benefit the employer by reducing the level of administration and to benefit the employee to ensure the right tax deductions are made in order to maximise the use of employee’s entitlements throughout the year.
We very much welcome a reform of the PAYE system. We are of the view that the new modernised system will better accommodate the complexities of today’s employment patterns and structures while simultaneously addressing the nuances associated with some of the more unusual payroll arrangements.
Having said that however, we also remain of the view that it is critical that there are no cost barriers for employers, particularly smaller employers, and also that mobile workers and non-routine payroll items are considered during the design phase so that RTI can be introduced with relative ease and be fit for purpose.
Revenue appear to be investing a significant amount of time and allocating extra resources at this stage which is a positive sign. Revenue’s responses outlined in the Report confirm that they are considering the various points raised during the consultation process and addressing these during the design phase in order to ensure that the transition can be effected with as little disruption as possible in January 2019.
It will certainly be an interesting few months ahead as we approach the end of the design phase and enter into the implementation phase. The introduction of the modernised PAYE system will mark a fundamental change in terms of payroll reporting for employers across the board given that the nature of the reporting mechanism has not been altered since the introduction of the PAYE system in 1960. We are currently engaging with employers to ensure that they are ready for the full roll out of the modernised system in January 2019. It is imperative that they put processes in place now to ensure that these changes are considered and communicated to the various interested parties as the process evolves.
The next milestone is when Revenue releases the employer submission data requirements in June 2017. We will continue to provide updates on this matter as they arise. In the meantime, please contact me should you wish for us to raise any matters concerning your company with Revenue.