PAYE Modernisation

It’s likely that you’ll have read many articles this year relating to PAYE Modernisation, which takes effect on January 1st 2019.

Revenue has announced that the National Employer Helpline will be extending its opening hours over the next few weeks, to provide support for employers regarding their new payroll obligations.

With that in mind, we’ve produced a simple end-of-year run-down of just what PAYE Modernisation is, what it’s for, and what it means for you.

What is PAYE Modernisation?

The current PAYE system was introduced almost 60 years ago, and it hasn’t changed since. In January 2019, then, the system will undergo the biggest modification since its inception, to streamline current processes and vastly improve their accuracy.

What the update means for employers is that, every time you run payroll, you’ll have to calculate and report your employees’ pay and deduction in real time to Revenue, along with any details of employees joining and leaving the business. This will be done within your payroll software.

Employers will need to deduct Income Tax (IT), Universal Social Charge (USC), Local Property Tax (LPT), and Pay Related Social Insurance (PSRI) from their employees’ gross pay every pay period as normal. The frequency of paying payroll taxes to Revenue will not change. If you are currently paying Revenue on a monthly basis, this will not change.

This real time reportage will ensure that Revenue is better able to keep on top of tax deduction for every employee, every pay period.

What does it entail?

There will be quite a few major changes to the way that payroll is processed.

  • There will be no more P30s, P45s, P46s, and P60s.
  • Instead of submitting annual P35s, a new submission file, the Payroll Submission Request (PSR), will be returned to Revenue after every payroll run.
  • Similarly, the current tax credit certificate, P2C, will be replaced by the Revenue Payroll Notification (RPN). These will be retrieved from Revenue by your payroll software. If you don’t use a payroll package, you’ll be able to request the RPN via the Revenue Online Service (ROS).

How it does benefit me?

PAYE Modernisation is intended to optimise the payroll process for all parties involved, and to ensure that accurate tax deductions are made every time. The time-consuming practices associated with P45s and P46s will be eliminated, and tax credits and cut-offs will be automated.

The new system will still account for employees on different pay frequencies, and will allow for corrections to be made before and after payments are made.

Will there be any extra work to do?

PAYE Modernisation has been designed to reduce the administrative burden on employers, and to streamline their reporting obligations. It won’t change the way that you calculate PAYE, and it won’t disrupt differing pay frequencies for different employees.

However, Revenue has also acknowledged that, for those employers processing payment manually – without payroll software – the Modernisation regime will necessitate an increased administrative effort – but they have taken steps to accommodate this manual reportage.

ROS will allow a payroll file to be manually updated after each payroll run for those employers who don’t use software, or whose software doesn’t communicate directly with ROS.

In April 2017, Revenue responded to queries and concerns, like the one above, in their Report on Public Consultation Process.

Remember, if you’re an employer with questions about PAYE Modernisation, the National Employer Helpline is extending its opening hours throughout December to assist with the change.

Thomas Howarth



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