NEW YEAR, NEW tax system – Revenue has been busy with a bit of an overhaul to how it processes PAYE taxes.
The “modernisation” will bring an end to the P45 and P60 in a bid to reduce the amount of paperwork involved in the process and make it easier for all parties involved.
Revenue has described it as the most significant reform of the PAYE system since its introduction in 1960.
When does it come into effect?
There has already been a bit of a transition to this new system. Since 1 January, last year, employers started to report their employees’ pay and deductions to Revenue at the time they were being paid.
This continues this year with payments paid on or after 1 January reported to Revenue when payment is made and using the new 2020 tax credits and rate bands.
On its website, the Revenue Commission says these rates apply even if the payment refers to work carried out in 2019.
Why the change?
The new changes aim to streamline business processes and reduce administrative burdens placed on employers when it comes to meeting their PAYE reporting obligations.
The changes also aim to ensure accuracy and increase transparency with the system.
Revenue, employers and employees all receive up to date information on pay, while the focus is on income tax, pay related social insurance (PRSI), universal social charge (USC) and local property tax being deducted at the correct time.
It looks like everyone is set to win, with the abolition of P30s, P45s, P60s and end of year returns, the employer has less paperwork to do and, in theory, saves more time.
Revenue says the process simplifies online services for the employee, allowing them to maximise their entitlements and view accurate real-time data.
While for Revenue, it makes compliance easier and reduces customer contact, saving it time too.
Is there anything employees need to do?
Not really. Employers will no longer provide a P60, to view an employment summary for 2019 and other years employees can see the information through their online Revenue myAccount.
Workers will also find their end of year statement, that looks at income and statutory deductions, in the same place. It indicates whether the correct amount of tax has been paid in that year. The statement will be made available from mid-January.
The Revenue website outlined that to obtain a final statement of liability (which was known as the P21 in a past life) employees must complete an income tax return – which can also be done online.