Hey P45, you’re fired! Revenue rolls out a new PAYE system
Big problem for small firms
IT’S always been synonymous with getting the sack – but it seems the dreaded P45 form itself is getting the heave-ho as part of a modernisation programme by the Revenue Commissioner.
The P45, which is issued when employment is terminated, along with the annual P60 summary of taxes and the P30 filed by employers will be eliminated on a phased basis next year as part of the plan.
According to its annual report published yesterday, Revenue is introducing a new ‘real time’ reporting system which, it says, will reduce the administrative burden on employers and see them report their payroll directly to Revenue every month, instead of on an annual basis.
These monthly reports will include details of pay, tax, deductions and records of any employees starting or leaving employment. Revenue says it will mean all workers’ tax affairs are always up to date, and negates the need for the P45, P60 and P30.
Revenue said: ‘The start of real time PAYE reporting from 1 January 2019 will result in improved accuracy and transparency for Revenue, employers and employees. It will reduce the administrative burden on employers, eliminating the need for forms P30, P45, P60 and end-of-year returns. It will ensure that ongoing employee tax deductions and contributions are correct.’
However, many small business owners are worried that their companies are not large enough to cope with keeping such salary information ‘bang up to date’ when their payroll administrator is on holiday or sick leave.
Forensic accountant Colum Whelan, of Guardian Management Accounting, warned that the move is not being welcomed by all ‘employers or accountants’ . He said: ‘It now exposes whoever does the payroll, be it a company themselves or their service provider, to serious financial penalties if they do not adhere to the exact system of payroll. Each error can result in a fine of up to €4,000.’
It will also serve to eliminate or penalise rogue employers and those who may be abusing the tax system by claiming to employ ‘ghosts’ with PPS numbers or indeed individual tax evaders who don’t give their PPS numbers to their employer and move from job to job.
He said it would have benefits but would also mean more work for small businesses. In some ways it will be a better system but yet again is placing more work and compliance on to employers in particular small businesses, for no financial reward and potentially costing them thousands in fines,’ he said.
A nationwide advertising campaign has just been launched on radio to ensure businesses are aware of the changes.
Revenue ran a consultation on the planned modernisation of the PAYE system late last year and it plans to put it into practice next January 1.
Eoin Fitzpatrick, who owns a wholesale toy and fancygoods business which employs 22 staff, said: ‘The concern I would have is there are going to be a lot of small businesses where there’s one person only doing the payroll.
‘Now this system is all meant to be live as you’re doing the weekly payroll but what happens if they go sick or are on two week’s annual leave in the summer?
‘The Revenue will have to make some sort of provision to catch up afterwards. It’s all very well saying it’s a brand new system and it’s all live and 100% up to date. That’s fine when you’ve a big office and loads of people to do it.
‘So if somebody’s away on holiday you will pay all the staff their usual net wage, that can be set up before the person goes on holiday and then it’s all made up afterwards.
‘There would be a concern about the way they are bringing it out, it’ll be 100% live and 100% up to date.’
Neil McDonnell, chief of the small business group ISME, said: ‘The Revenue, to be fair to them, are the most professional of the Government services but there are issues about who you deal with over this.
‘At the moment you deal with your employer about your pay and you deal with your tax office on your tax and this will blur the lines between those to some extent and that will be uncomfortable for some people.
‘We welcome the direction they want to take but this is going to present small employers who do their own payroll with a big problem and we are not satisfied yet that everyone’s ready for this.
He welcomed the national advertising campaign to alert small firms to the changes but said we ‘think the Revenue is underestimating the size of rolling this out successfully’. christian.mccashin@dailymail.ie