Payroll tax compliance remains an area of ongoing focus for Irish Revenue. The introduction of additional employer mandatory reporting with respect to “reportable benefits”, expected to apply from 1 January 2024, will enhance an already active payroll intervention regime. It is expected that the data collated may also serve to influence future employment tax policy decisions. Our Employment Tax team explain what's required, and the associated implications, below.
What do you need to know?
Under the new rules, employers will be obliged to file an additional electronic return with Revenue on or before any payment or reimbursement of reportable benefits to an employee occurs. Reportable benefits covered by the provisions are currently:
- Remote Working per-diem of €3.20
- Vouched and Unvouched travel and subsistence payments, and
- Vouchers and trivial benefits covered by the small benefits exemption
Although the Enhanced Employer Reporting (EER) return is separate to any payroll filings, it will follow similar real time reporting principles and all required information will need to be collated prior to payment or delivery of a reportable benefit.
Further the EER will require detailed information by relevant reportable benefit on an employee-by-employee basis. The employer will be required to use key identifiers such the PPS number, date of birth and/or Work ID, etc., per employee. This format will enable Revenue to not only see the quantum and frequency of reportable benefits but also the key claimants by category in real-time.
Although the Enhanced Employer Reporting (EER) return is separate to any payroll filings, it will follow similar real time reporting principles and all required information will need to be collated prior to payment or delivery of a reportable benefit. Further the EER will require detailed information by relevant reportable benefit on an employee-by-employee basis. The employer will be required to use key identifiers such as the PPS number, date of birth and/or Work ID, etc., per employee. This format will enable Revenue to not only see the quantum and frequency of reportable benefits but also the key claimants by category in real-time.
Current reportable benefits are areas of recurring tax default on Revenue payroll interventions, most often arising due to poor internal controls and processes. With the introduction of this reporting measure, Revenue will have real time information available in relation to the payment of tax-free payments and expenses and the provision of the tax-free small benefits enabling more focussed payroll interventions. It is also worth noting that there could be VAT implications where personal payments/benefits have been incorrectly classified as tax free business expenses for payroll purposes.
Revenue have indicated that this measure, as introduced, will be the first phase of additional employer reporting with respect to the provision of tax-free benefits and payments made to employees with future developments expected over the coming years.
There are several conditions which must be met in order for an employer to make a payment or reimburse an expense tax free without operating Irish payroll withholding. The conditionality enabling tax-free status of the listed reportable benefits varies depending upon the payment or benefit provided. It is therefore important that employers have underlying controls and processes and supporting documentation available to substantiate preferential tax treatment by category.
Exclusions from reporting
The current focus of EER reporting relates to payments or benefits provided directly to the employee. Currently out of scope of reporting are payments by the employer directly to a vendor or supplier e.g., corporate taxi account, corporate travel agents.
Revenue have also indicated that where corporate credit cards are in use and the employer settles the credit card bill directly with the provider, expenditure costs are not currently considered reportable benefits. As the focus is on the reporting of tax-free elements, it also follows that taxable minor and irregular benefits currently disclosed on a PAYE Settlement Agreement (PSA) by the employer are out of scope of this additional reporting.
Considerations for employers
Significant considerations arise for employers in preparation for the roll out of this mandatory reporting obligation. The level of time involved in reviewing and adapting internal processes may be significant. Various stakeholders across the business may currently be involved in managing delivery of different reportable benefits. Therefore, engagement across all stakeholders will be required in order to map out a streamlined process for data collation.
Some aspects to consider include:
- How robust are your policies and procedures around expenses, remote working, and small benefits?
- Do you have a clear view of the quality of the data in your expense systems?
- How manual or automated are your current processes?
- How easy or difficult will it be to map expense categories from your systems to the relevant Revenue category?
- How frequently do you reimburse expenses or make per diem payments and are these on different dates to each other?
- What element of your employee expenses currently may fall into the out-of-scope category?
- Would a change in process improve efficiencies and reduce the administration involved?
- How easy it is to provide comprehensive supporting documentation and records to substantiate the tax treatment adopted if required?
How can KPMG help?
Our team is made up of employment tax and tax technology specialists who have significant experience in helping employers of all sizes conduct PAYE reviews, prepare for Revenue audit interventions, establish policies and procedures which support payroll compliance.
Ensuring the business has the right policies and procedures in place to support the new ERR will be key. Consideration should also be given to performing a PAYE Health Check to obtain a broader understanding of current payroll compliance risks.
We can strategically assess your payroll compliance position and policies and procedures in relation to reportable benefits. We can make clear, relevant and practical recommendations in order to streamline and future proof your processes and procedures. This will in turn ensure payroll tax compliance is maximised.
A review of the quality of the data within your expense system and an understanding of how this data can be mapped to Revenue’s reporting system on ROS will be very important. Our tax technology team leverages market leading technology to data-mine employer information for review and can work with you to ensure a smooth implementation of your ERR processes and procedures.
Tax Principal, People Services & Head of Global Mobility
KPMG in Ireland