Revenue and employer PAYE compliance update

20 December, 2019

Revenue has reported a yield of €77.4m from employer compliance projects in preparation for the introduction of PAYE Modernisation or Real Time Reporting (RTR). Read below to learn about the main areas contributing to this yield. 

The Code of Practice for Revenue Audit and Other Compliance Interventions has been updated. Revenue has indicated that “the revisions to the Code relate primarily to PAYE Modernisation”. Read below to learn more about these changes and what they mean for your business. 

The Minister for Finance, in his Budget 2020 Statement, announced a new Dividend Withholding Tax real-time reporting process, which will use data collected under the modernised PAYE system. Read below to learn more about this development.

What should employers be doing now?

Employer PAYE compliance 

In its ‘Evaluation of Budget 2018 Compliance Measures’, Revenue has reported a yield of €77.4m from employer compliance projects in preparation for the introduction RTR. This is well in excess of the Budget 2018 target of €50m. Revenue attributes this yield to Revenue interventions, improvements in systems and data and increased compliance, all of which have boosted tax collection.

  1. Revenue interventions
    Revenue has an annual programme of risk management interventions. In 2018, this programme was supplemented by a series of employer visits in preparation for PAYE modernisation. €6.4m was collected from interventions which specifically targeted payroll risks.

  2. Systems improvements
    Throughout 2018, Revenue also initiated data clean-ups and improved matching of data in the PAYE area, yielding €47.4m.

    This included:
    • a review of married credits, yielding €5.9m,
    • a review of taxpayers identified as employers but with no employees, yielding €16.8m,
    • the improved tax collection on taxable DEASP payments, yielding €12m,
    • the identification of more than 58,000 workers in the shadow economy, yielding €12.7m.
       
  3. Overall collection
    In addition to the amounts above, Revenue estimates (conservatively, in its own words) that an additional circa €23.6m is attributable to preparatory work for PAYE Modernisation. This gives a total yield of €77.4m, well in excess of the Budget 2018 target of €50m. 

Code of Practice for Revenue Audit and Other Compliance Interventions

The Code of Practice for Revenue Audit and Other Compliance Interventions has been updated and Revenue have indicated that “the revisions to the Code relates primarily to PAYE Modernisation”.  

Dividend Withholding Tax real-time reporting process

In Budget 2020, the Minister for Finance announced the introduction of a modified Dividend Withholding Tax regime which will use real-time data collected under the modernised PAYE system. 

It is envisaged that Revenue will make available a personal withholding rate to allow companies who pay dividends directly to individuals to calculate the dividend withholding tax to be deducted for each individual. The company will report, in real-time, to Revenue for each individual the gross dividend paid and the associated dividend tax withheld. For this to operate companies will be required to obtain a Personal Public Service Numbers (PPSN) for each individual.

The Minister sees this as a further opportunity to deliver tangible benefits to taxpayers of the newly modernised PAYE system in place since last January. It is also a continuation of the trend to impose further tax reporting and collection obligations on companies.

What could be next?

Employment tax audits have been unusually lacking in 2019. This is likely due to Revenue’s additional workload during 2019, supporting companies with the transition to RTR. However, a renewed focus on employment tax is likely in 2020. This could be in the form of audits or other compliance interventions, which employers should note are governed under the Audit Code of Practice. 

Notwithstanding the lack of formal employment tax audits during 2019, Revenue has reported a yield of €77.4m from employer compliance projects as noted above and has stated in its ‘Evaluation of Budget 2018 Compliance Measures’ that ‘further yield is expected over time’. 

In generating this expected yield, we anticipate that Revenue will continue to apply risk-based analysis to the immense amounts of data being submitted by employers under RTR. Revenue’s newly established Data Analysis Team will be central to this. 

As an employer, what do you need to do now?

Employers must continue to review their business processes to ensure that they can report consistently and accurately in real time. This is critical in light of:

  1. the ability of employers to self-correct within what appears to be an ever-decreasing window of opportunity, 
  2. Revenue applying fixed penalty charges to employers who did not operate the PAYE system properly, and 
  3. an anticipated focus on employment taxes by Revenue in 2020. 

Contact us

Please reach out to your usual PwC contact or any of the team below if you have any queries in relation to:

  • Real Time Reporting,
  • the updated Code of Practice for Revenue Audits and compliance interventions in general, or
  • a Revenue query already issued to you.

Contact us

Doone O'Doherty

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6593

Jessica Webbley-O'Gorman

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 6518

Emily Bourke

Senior Manager, PwC Ireland (Republic of)

Tel: +353 1 792 6796

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