Get Ready for PAYE Modernisation – Umbrella Company Contractors

WHAT is PAYE Modernisation?

PAYE Modernisation is the new method in which reporting pay, tax and other deductions must be submitted to Revenue.
This will involve the most significant change of the PAYE system since 1960.

WHEN is PAYE Modernisation taking effect? 

PAYE Modernisation comes into effect from the 1st January 2019.
Read our tips and FAQs below to prepare for PAYE Modernisation.

WHY is PAYE Modernisation taking place?

PAYE Modernisation aims to modernise the reporting of tax deductions to the Revenue Commissioners by a new real time reporting regime.
From 01.01.2019, tax deductions must be communicated to Revenue in real time for each pay period.
Revenue will abolish the reporting obligations for P30s, P45s, P46s, P35s and the generation of P60s.

If you a Contractor under an Umbrella Company, you must action & follow the below steps: 

  1. Create & Register an online Account with Revenue
  2. Check & Review your Tax Credits

STEP 1:  HOW TO SET UP YOUR REVENUE ACCOUNT:

Revenue requires everyone to set up an online Revenue Account.

If you do not have an online Revenue account, you must do so before January 2019.

Simply follow the link here: https://www.ros.ie/myaccount-web/register.html?execution=e1s1

If you are unsure how to set up your account or require details of your Umbrella Company, please contact your Payroll Account Manager in Icon Accounting.

Once you have set up your Revenue online account, you can then review your Tax Credits.

Please note that is not possible for Icon Accounting to set up online Revenue Accounts on behalf of Contractors.

STEP 2:  CHECK YOUR TAX CREDITS & TAX BANDS (2019)

Standard Rate Cut-off Point 2019

Single Person Tax Credit:  €35,300

Married Couple (1 income):  €44,300

Annual Tax Credit 2019

Single/Widowed Person or Surviving Civil Partner Tax Credit:  €1,650

Married Couple Tax Credit:  €3,300

Earned Income Tax Credit:  €1,350

PAYE Tax Credit: €1,650

For a full list of tax bands, please refer to: https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/tax-relief-charts/index.aspx

FAQ:

How does PAYE Modernisation work in practice?

When a salary payment is made to a Contractor, Icon Accounting must inform Revenue of the taxable amount that is paid. We do this via Revenue On-line system. Revenue will then inform Icon Accounting of the amount of PAYE/PRSI and USC that should be deducted. This is via a RPN (Revenue Payroll Notification).

What if Revenue have the incorrect tax credits or pay to date?

If you have provided Revenue with up-to date and correct information regarding your tax credits, then the PAYE Modernisation system will work correctly, and the correct tax will be calculated. If your tax credits or pay to date is incorrect, you must inform Revenue on this immediately. For this reason, it is important to check your current tax credits and tax bands, and also again in January 2019.

Can I amend my payslip?

It is not possible to amend your payslip in the current period once Revenue have issued the tax details. It is the onus of the Umbrella company to remit tax deductions that Revenue have instructed. However, any difference or amendments can be resolved in the subsequent payslip.

Can I lose out financially from the new PAYE Modernisation System?

You cannot lose out financially from this new system. You will still pay the tax that you are due to pay, however, if the details Revenue provide Icon Accounting are incorrect, more tax may be deducted in a particular period. However, once this is identified and Revenue are informed, this will be rectified in the following pay period.

Can I still claim Business Expenses?

Yes, you can still claim business expense. Your business expenses must be submitted prior to your payroll been processed. It will not be possible to adjust your payslip for extra expenses or expenses that have not been submitted. These expenses will go into your following payroll period.

Currently I work on a monthly basis but don’t get paid until the following month. What is my pay period for tax purposes?

If for example you work in January, but payment is issued in February, then your payroll period will have to be February. With the new PAYE Modernisation system, the payment date must match the date of your pay period rather than the period that you are invoicing for.

Will PAYE Modernisation have an adverse effect on my payroll? 

The new PAYE Modernisation system will not have an adverse effect on your payroll.

Depending on the payment terms of your contract, this may result in your payroll period falling into the subsequent month as outlined in previous example. If so, your first payroll in 2019 may result in a higher net pay, as you would in effect have 2 months tax credits and bands.

However, when you cease contracting and take up a new contract role, you may have 2 payrolls processed in the same period.

What should I do to prepare for PAYE Modernisation?

If you haven’t set up a MyAccount with Revenue, you should do so immediately – https://www.ros.ie/myaccount-web/signinhtml?execution=e1s1.

Once set-up, check your tax credits and bands to ensure they are correct. If you are unsure on tax credits or bands, contact your Icon Payroll Account Manager.

If married, you should also check that you and your spouse’s tax credits have been correctly allocated.

What happens when I leave the Umbrella Company?

When you inform Icon Accounting that you no longer require the services of the Umbrella Company, and your last payment is processed, we will inform Revenue that you have ceased contracting. Revenue will update their system with the real time information.

You will no longer receive a P45. For this reason, it is imperative to have your Online Revenue ‘MyAccount’ set up with Revenue and ensure your tax credits and bands are correct.

Got a Question?

Our Icon Accounting Team will be more than happy to answer any questions you may have.

Please contact us:

Tel: 01-8077106

Email: info@iconaccounting.ie