PAYE Modernisation – What you need to know

PAYE Modernisation comes into effect on the 1^st January 2019.

Employers will be obliged to report their employee’s pay and deductions to Revenue when/before they are paid.

Employers will be required to electronically submit a file called a PSR (Payroll Submission Request) to Revenue each time there is a payroll run.  This will inform Revenue where an employee is working and how much they are earning in real time and also avoid overpayments/underpayments of tax by allocating the correct tax credits to the employee.

Retrieval of tax credits and cut offs for employees will also be automated using RPN (Revenue Payroll Notification) which employers will need to check before each payroll run.  Revenue will then issue a monthly statement to employers based on the payroll submission received.  There is no change to payment due dates.

There are also new Emergency tax rules from 1^st January 2019.

The first four weeks of pay will be taxed at the standard rate up to emergency cut off point and the high rate above the emergency cut off point.  No tax credits will be applied.  After the first four weeks, all pay will be taxed at the higher rate.

The rate of Emergency USC is 8% on all earnings.  These rules should be applied where an employer makes a payment to an employee and they have not received a retrieval of tax credits from Revenue.  The Emergency rules should also be applied if a PPSN has not been obtained for a new employee. Where there is no PPSN for an employee all pay should be taxed at the higher rate.  Employers will only be able to process pay for an employee without a PPSN for three months.

Paye Modernisation will allow employees greater visibility through ‘My Account’ on ros.ie as pay will be reflected in real time.  This will also replace the need for employers to issue P60’s at the end of the year and P45’s upon an employee leaving an employment.

Why not also read our blog on Legal and Tax Implications of Director’s Loan  here