Bye bye P45: Revenue moves to modernise PAYE

Small firms concerned that new approach will be time-consuming and not cost-effective

 Revenue  wants  employers  to report pay, tax and other deductions, as well as details of employees leaving, when they run their payroll.

Revenue wants employers to report pay, tax and other deductions, as well as details of employees leaving, when they run their payroll.


Businesses across Ireland have broadly welcomed the impending introduction of real time reporting (RTR) for employers as part of efforts to modernise the PAYE system. Smaller businesses however, have expressed concern about the administrative burden of the new regime, particularly those in areas with poor internet access.

Late last year the Revenue ran a consultation on the modernisation of the PAYE system, as announced in last October’s budget. The proposed modernisation means that from January 1st 2019, the Revenue Commissioners intends that employers will report pay, tax and other deductions to Revenue, as well as details of any employees leaving the employment, at the same time as they run their payroll. Moreover, details of employees starting employment will be reported before their first pay day, while the modernisation will also involve eliminating the filling of P30, P35 and P45 forms.

Mary Healy, a tax manager with the Irish Tax Institute, says the move will “affect every employer and every employee in the country”.

On Monday, the Revenue disclosed that it had received 77 submissions to the process, representing a broad range of interests, including the Irish Tax Institute, SAP UK, McDonald’s Restaurants, and Irish Life. There was a also considerable number of small businesses responding, including Design by Nature, Rhu Glenn Country Club and Tipperary Glass.

Smaller employers

As Ms Healy notes, for larger employers the modernisation will be straightforward, but Revenue is looking at trying to accommodate smaller employers, some of whom might not use software at all, and might be doing a payroll manually at present.

Ibec said that while most of its members would welcome the change, it is important that the system is “flexible”, while professional services group PwC warned that the work required by employers to prepare for the implementation of RTR “should not be underestimated”.

McDonald’s questioned the need to have details of employees before they commence employment with the fast-food chain.

“We hire a significant number of employees who may be new to residency in Ireland and may not have a PPS number and bank account available to notify Revenue before they start working with us. This could have an impact operationally on our stores who typically recruit a diverse workforce.”

Irish Life on the other hand had another issue. “We may not be able to inform Revenue about new employees before their first pay date as we pay income in advance.”

Administrative burden

Smaller businesses had specific concerns. One anonymous respondent questioned the current system with regards to the administrative burden of employing casual and infrequent part-time labour.

“With all the attendant paperwork there is no chance of me doing this if all I’m employing someone for is one week during a year. Much easier to pay them cash.”

Many others welcomed the elimination of the need to complete P30 and P45s, with Dublin based Cofri Cosmetics saying modernisation “will make things easier”.

However some questioned the process. Carlow-based wildflower seed company Design by Nature argues that with its poor internet connection, and the seasonality of its business, taking time during the busy summer season to process files will hurt the business. “Our internet is rubbish, so to expect uploads every payroll is unfair,” says Sandro Cafolla, arguing that the new process “will severely impact on my business”.

Hillview Properties, a property management company, also has a concern. “Small companies like ourselves would have difficulties in compliance as we feel you will be overloading our work system.”

This view is echoed by Select Auto Parts, a firm with two employees which does not use payroll software, and as such PAYE modernisation would be “time-consuming and not cost-effective”.

The Presentation Sisters expressed concern about the training that would be needed for staff who are not computer literate.