New Employee - PAYE Modernisation

exaisle

Hi All,
I'm just wondering if anybody who runs payroll has experienced delays in getting updated tax credits for new employees? I've had new employees start for clients in the past week...one previously employed who left their previous employment last Friday, and the other, a student, who had been doing summer work last year but who hasn't worked this year yet. I notified revenue of the commencement of both on Monday and as yet tax credits have not been updated for either, so they're going to be stuck on Emergency tax, which is far more penal now than previously.
My view is that the emergency tax regime under the new PAYE system is too drastic. It's all very well to penslise somebody who hasn't informed Revenue of a change of employment, but when Revenue are aware of it but haven't changed the credits, then perhaps the new system should be looked at with a view to softening the Emergency Tax rules slightly.

And while I'm at it, has anybody had a satisfactory response to the question of Directors Fees voted after the year end. These were previoiusly dealt with by an amended or supplementary P35 but it appears that Revenue want them dealt with in real time.
It appears to me that Revenue do not understand the concept of Directors Fees. After all, the system is PAYE - Pay as you EARN, not Pay as you get Paid. In the case of Directors Fees, the income is earned in the previous year (assuming the accounting date is 31st December).

Tow

What does "I notified revenue of the commencement" actually mean?

Then a New RPN is 'Requested' it will normally be provided. If not, the Employee must contact Revenue by phone personally. The most common causes of 'No RPN' are their first employment in Ireland, exemption case or case worker assigned (audited) etc.

If an RPN is issued and is on a Week1 with zero allowances, then they are still allocated to another employer. If/When an employer sends a Payroll submission with a Leave Date and the employee has another employment, they will auto allocate to it. Note, the other employment may not be your employment.

In any event, it is the employee's responsibility to manage their own RPNs, Revenue expects they do this by logging on to MyAccount on the web or Revenue App.

Directors Fees are handled by setting the 'Shadow Payroll' flag on their Payroll Submissions. This informs Revenue that there may be late Submission(s) and delays the issuing of their year end statement.

exaisle

Thanks for clarifying....much appreciated. Your post gave more pertinent information than the all of the CPD I did on PAYE Modernisation!

E.

exaisle

To follow up, I contacted Thesaurus, whose payroll system I use for several clients. Unfortunately, it appears that there is no facility in their software to flag Shadow Payroll. Can this be done by some other means?

exaisle

Actually, I'm coming to the conclusion that Shadow Payroll isn't the solution...

https://www.revenue.ie/en/employing-people/becoming-an-employer-and-ongoing-obligations/payments-to-employees/directors.aspx

The difficulty I have with the Revenue approach is that the P35L figure for a financial year, may not correspond to the amount actually earned in that year. Secondly, in adopting the Revenue approach in a situration where in, say, March 2020, there is salary of €5000 and Directors Fees of €10000 paid to a director, how do you isolate the amount of PAYE, USC & PRSI deducted in respect of the (deemed) 2019 earnings?

Also, we have to remember that this is PAYE....Pay As You Earn. Not Pay as You are Paid. Directors Fees are EARNED in the previous accounting period. Indeed, they correctly appreat as an expense in the P&L Account for the previous year.

It seems to me that some facility should be made to allow the system that operates at the moment to continue, ie that an amended/supplementary P35L or equivalent be submitted to cover payments that legitimately apply to the previous tax year.

Tow

The Shadow Payroll indicator is a True/False value. All it does is delay the issuing of their statement. If you software does not support it, it is possible to manually change most fields on ROS after payroll submission. However, all changes are logged in their risk analysis system, which may result in compliance actions.

You need to forget about any previous meaning of PAYE and previous 'P' forms. Companies are expected to change their practices to meet new Revenue's requirements.

For example: 'The date paid is the Pay Date'. Many companies have have paid employees in January for money earned in December, using a December's Pay Date. Revenue view this as illegal and have 'required' them to redo their 2018 P35 and P60s etc, removing all these January payments. The payment(s) must then be recalculated for January, which in turn affects all pay runs to date. 'What is paid must be reported even if wrong' to Revenue, so the other pay runs are left as is on ROS. But, they have to be rerun to calculate the difference. The net difference is then applied to the current pay run, which can easily wipe out an employees pay for the week.

As per the link:

Where a director’s salary is voted, you must operate PAYE on the date the payment is made. Emoluments paid more than six months after the end of the accounting year, are deemed paid on the last day of the previous year. You must make an amendment to the payroll submission for that period and resubmit to Revenue.

The system is designed to reduce 'messing' by hard enforcing a hand full of basic rules. This is expected to bring in an extra 50M per year, effectually paying for the PAYE Modernisation in the 1st year.

mogilvie

Further to @tow

There are no fields in the new payroll submission for directors fees. It is treated just like any other PAYE income, and needs to be declared on or before the actual payment to the individual.

Regarding Shadow Payroll, there is a true/false submission field for this. Shadow payroll's are run for employees physically located in other tax jurisdictions who, for whatever reason, are still paying taxes/deductions in Ireland. They're not for directors fees. For example, we have users with remote working staff in other countries on longterm assignment, who are still paying PRSI and property tax in Ireland. When they return for periods of work in Ireland they are also processed as a shadow payroll.

Regards,
Mark
https://parolla.ie