Modernising our PAYE system will not be without pain
By Doone O’Doherty, Tax Partner, People & Organisation, PwC
What is RTR?
Employers will be required to report pay, tax and other deductions, as well as details of employees leaving their organisations, at the same time as they run their payroll.
In effect, RTR signals the end of the P-Forms: no more monthly P30s or annual P35s, no more P45s or yearly P60s.
Surely all I need to do is update my payroll software?
No. Revenue describes the proposed move as a "fundamental change ... for Revenue and employers". Revenue’s view is that there will be a "significant business process change and change management exercise to be completed...for Revenue and employers alike".
Post 1 January 2019, the PAYE landscape will be vastly different, with the responsibility being on employers to supply the relevant payroll data to Revenue at the same time as employees are paid. The consequences of not doing so accurately and on time will likely mean penalties for non-compliance as well as more focussed Revenue audit and ‘non-audit’ interventions.
So what should I be focussing on?
RTR is not a payroll processing matter.
The quality of the data provided to payroll is one of the most crucial issues.
Employers need to ensure that their data is accurate, reliable and up to date. Revenue has already embarked on a data alignment exercise - phase 1 of this saw Revenue contact approximately 400 employers regarding their P35L returns for 2016. These returns contained employees who were never previously registered as working with the relevant employers. We understand that the next phase of this exercise will commence shortly.
Companies with globally mobile workforces need to pay particular attention to the requirements of RTR. Mobile employees generate a significant amount of data for their employers. In particular, the payment of bonuses and the delivery of share awards are times of significant data assessment and payroll communications. The onus is on the organisation to process and report the right tax deduction, at the right time, for the right employees, in the right location. This will bring particular challenges, in terms of data capture and payroll processes as well as ultimate tax compliance.
What’s the benefit for Revenue from all of this?
Under RTR, Revenue will have substantively more information (and indeed more detailed information) from payroll reporting than at present. And we know that Revenue is already planning to use this information. All data received by Revenue, including corrections and the timing of submissions, will feed into Revenue’s risk analysis systems and allow for more accurate tax compliance risk analysis.
Who should I be speaking to in my organisation?
Payroll brings together a wide range of different information types and sources, from personal employee data to salary/bonus/share award reporting as well as benefits such as medical insurance and pensions. It is not surprising, therefore, that responsibility for employment tax often lies with many areas in an organisation. The communication process will, therefore, be very important. Organisations will need to be fully aware of and collaborate with all stakeholders in their organisation’s employment tax universe – this could involve all or some of the following: payroll managers, HR, Finance, Tax and team leaders making decisions in relation to ad hoc benefits and working arrangements.
RTR will present a significant business process change and we urge businesses to start planning immediately.