85% of Ireland’s SME’s have a lot of work to do in advance of Jan 1st PAYE Modernisation deadline

Survey signals “Busy” Q4 ahead for Irish SME’s as they prepare for huge changes to a system first introduced in Ireland 1960

While 66% of SMEs throughout the country are “short on detail” on the PAYE system overhaul due to come into effect on January 1^st 2019, 40% say they are “not at all prepared” for the changes necessary to their payroll systems in advance of the deadline.

These were the findings of the latest Big Red Cloud SME Survey, which asked over 200 business owner/ managers throughout the country their position on the PAYE Modernisation being introduced by the Revenue.

Speaking of the findings, Marc O’ Dwyer, CEO of Big Red Cloud, a leading supplier of payroll and online accounting software to the Irish SME market:

“We’ve been doing a lot of work behind the scenes to prepare our Payroll software and to ensure all our client’s and their payroll processes are compliant when the changes come into force. We have also been working closely with the accountants working with SMEs all over Ireland, to assist in any way we can as everyone gets ready for the huge overhaul of the PAYE system – the first in 58 years – that will come into force in just over 4 months.

As the year progresses, it is becoming increasingly apparent to us that, not only are many businesses not ready, many are simply unaware and/ or uninformed of the changes & what they will mean for their business. The findings of this survey are real evidence of this & I think it’s important that consideration is given to the results & that efforts are made to help owner/managers take the necessary steps over the next few months to ensure their business is Revenue-compliant by Jan 1^st.”

Highlights from the Big Red Cloud survey include:

• 66% of SMEs “short on detail” on PAYE system overhaul
• 5% are “completely unaware” of the changes
• 40% of SMEs are “not prepared at all” for Jan 1^st PAYE modernisation deadline
• Just 15% say they are confident they will be ready
• 92% know the exact date the changes will come into force

Mr. Dwyer went on,

“Our survey really drives home the fact that hundreds, if not thousands, of businesses throughout the country have a lot of work ahead of them to ensure they are ready for the changes. I believe that there is now an urgent need for communication and awareness campaigns, because many people simply don’t know enough about PAYE modernisation and the impact it will have on their business.”

Niall Cody, Revenue Chairman has said modernising the PAYE system and move to real-time PAYE on 1 January 2019 “represents an important step in the process of continuous improvement in service, compliance and efficiency in our administration of the tax system”, and while improvements and efficiencies may well be the end-goal, it’s clear that businesses, particularly those at the smaller end of the scale will need some help to get there.”

Big Red Cloud say that Revenue’s efforts are definitely warranted, given the fact that the existing PAYE system had been introduced in 1960, at a time when a job was typically for life and payroll was a manual process.

Mr. Dwyer continued: “Move on to today and the nature of employment has signi?cantly changed, with commonplace patterns such as people moving jobs regularly, agency work, and multiple concurrent jobs. Revenue felt that the time had come to modernise the PAYE system, and in doing so, to take advantage of modern information and communications technologies to provide a real-time tax reporting regime”.

The New System

The new system will see employers submitting payroll data in real-time as employees are paid. Big Red Cloud say it represents a fundamental shift from the existing system where detailed payroll data in the form of a P35 (end of year return) is submitted annually.

Mr Dwyer explained: “Every aspect of how an employer ful?ls their PAYE reporting obligations will change to a real time electronic submission of the data. That covers everything from commencing employment, statutory deductions (PAYE/ PRSI/USC), as well as the cessation of employment. Gone will be well-known forms P45, P46, P30, P60 and P35.

All employers should review their payroll procedures and make sure that they are ready in advance of the go-live date for PAYE modernisation in January next year

Recent feedback from accountants and bookkeepers have raised some concerns about the additional compliance that PAYE modernisation places on smaller employers. Such employers typically present payroll records to their accountant or bookkeeper on an annual basis for submission of the P35. A real-time system places both a cost burden on these smaller employers, as well as a logistical issue for how they will communicate payroll information on a routine basis throughout the year. It is, as yet, unclear how this will be resolved, but it would appear that there are no derogations planned by Revenue for smaller employers.”