Revenue calls halt to ‘€10 an hour and sort out tax later’
Sinn Féin has branded forthcoming PAYE tax system changes as unworkable for farmers.
New rules coming into effect from January 1, 2019, mean that all wages payments must be reported in real time to Revenue, using their online systems.
This is the most significant change to the way employers operate payroll, since the introduction of the PAYE system in the mid 1960s.
The changes cover all employers, including farmers who employ their spouses, children and who have full time, part time or casual employees.
Employers must report to Revenue the gross amount of wage to which the employee is entitled, at the point of payment.
In turn, the Revenue’s system based on real time information will provide the employer with details of the amount of PAYE (income tax), PRSI and Local Property Tax (LPT) to deduct.
Action is required now, for employers to get ready for the changes.
They should ensure all existing (and future) employees, including family members, are formally registered with Revenue, and that relevant tax credits and tax band are allocated to the employment.
The employee must also register the employment through their online “myAccount” profile, which is an individual’s personal Revenue portal.
Where an employee is not formally registered with an employer, the effective tax rate could be as high as 52%.
The option of paying an employee “a tenner an hour” into the hand and sorting out their taxes later is simply undoable under the new system.
The penalties for not operating payroll, or not operating payroll correctly, are significant.
There is the potential of a flat €4,000 flat penalty applying to each instance.
Currently, such penalties are rarely applied.
But with a move to a live system, there is speculation that automation of these penalties may be introduced.
As a further penalty, an employer could also be liable to pay the taxes which should have been withheld on a gross-up basis.
This means, for instance, that a €100 payment to an employee which was not processed correctly through payroll could result in a tax liability to the employer of €131.
In the coming weeks, Revenue will be requesting all employers to provide them with a list of their employees.
Ahead of this, employers should ensure that firstly they are registered as employers, that all existing employees are correctly registered, and that tax credits are allocated to the employment.
From a farming perspective, many payments made to children are sporadic in nature, depending on cash flow.
These payments may indeed be made in one lump sum, or even after the year end, if cash flow difficulties are experienced throughout the year.
Farmers and agricultural contractors who employ full time staff typically pay employees on a weekly basis, and in the case of temporary employees, payments are typically made on the day.
In either of these scenarios, the new changes will provide significant challenges, and administration costs will undoubtedly arise.
There will be no such thing as pulling out the cheque book and sorting out the paperwork afterwards.
Speaking at an IFA meeting in Castlebar last week, Sinn Fein’s Senator Rose Conway-Walsh described the system as unworkable.
She said that many farmers do not have access to broadband, or may not have a computer, or the necessary skills, so asking them to upload details before a payment is made is unrealistic.
Revenue will be rolling out regional seminars in September 2018.
They have already issued letters to employers notifying them of the changes, and have begun contacting employers by phone and through calls to business premises with a view to making employers aware of the changes.
