Tuesday 22 January 2019

Up to 120,000 employees could end up paying 51pc emergency tax as new PAYE system rolled out

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Charlie Weston

Charlie Weston

THOUSANDS of workers could end up having too much tax deducted from their wages as a new PAYE system beds in, accountants have warned.

It comes as large numbers of workers receive their first pay packet of the new year under Revenue’s new online reporting system.

The ACCA (Association of Chartered Certified Accountants) said some 120,000 people may be impacted. If the wrong employment details are on the new system these employees could end up on an emergency tax rate of 51pc.

ACCA said that any underpayment will be refunded in a subsequent pay packet by updating their tax records but that it may take weeks for refunds to be paid.

The accountancy body warned employers not to provide hand-outs to tide people over until corrections have been made.

A new PAYE (pay as you earn) system was introduced this month by the tax authority. The system will see employers submitting payroll data on a regular basis.

This represents a fundamental shift from the present system where detailed payroll data is submitted annually in a P35 form.

Any glitches in the records are initially set to impact up to 120,000 people who are paid weekly, receiving their wages yesterday, the accountants said.

Chairman of ACCA Ireland Stephen O’Flaherty warned: “For those people that have incorrect employment details, the emergency tax rate of 51pc will be applied, coming as a big shock for many with their gross pay being cut in half, with the other half being paid in additional income tax.”

ACCA has said that this will only be rectified by employees updating their details on MyAccount at Revenue, but this could take weeks.

The professional body has also advised employers against providing additional funds to tide employees over as this may see them having to pay penalties for making incorrect returns.

Mr O’Flaherty added: “The implementation of emergency tax for employees that do not have the correct records will considerably reduce their disposable income, post-Christmas, when households are already very stretched.”

He advised employees impacted to register on MyAccount on the Revenue website and update their records as soon as possible, stressing that it is incumbent on them and not their employer to do so.

Those people that are paid monthly still have time to make sure their salary is correct by updating MyAccount before the end of January, he added.

What has been dubbed PAYE Modernisation is one of the largest shake-ups for the system in decades.

There has been little or no change to the existing PAYE (pay as you earn) system since 1960.

Lately Revenue has been working to update and modernise it.

With PAYE Modernisation, the system is essentially moving from one where information on employees is submitted annually, to an online one. Information about employees will now have to be submitted for each payroll run.

In most cases, this means a file will be submitted either weekly or monthly.

This will eliminate the need for employers to file P30, P45, P46, P60 and P35 returns as information will be returned to Revenue instantaneously.

Revenue said the change will put the focus is on tackling the problem of overpayment and underpayment of taxes.

It said that PAYE employees will be able to claim tax credits and reliefs with more ease under the new arrangements.

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