Employer Update
Background
Finance Act 2022 introduced Section 897C of the Taxes Consolidation Act 1997 which provides for mandatory real-time reporting of certain ‘reportable benefits’ provided to employees and directors.
The new legislation, which is subject to a Commencement Order by the Minister of Finance to facilitate stakeholder engagement on its implementation and design, is due to go live on 1 January 2024.
As part of Phase 1 of the stakeholder engagement process, Revenue issued a survey in January 2023, inviting employers, software providers and tax agents to provide insights and feedback to assist them in the design of the new reporting requirements. The survey was released to all employers through their ROS inbox, however, only a small number of employers were aware of the survey. As a result, only 3,200 employers completed same.
On the back of concerns raised by practitioners at Main TALC regarding the lack of awareness and engagement with key stakeholders, including end users (i.e., employers), a Main TALC Subgroup for the new Enhanced Reporting Requirements (ERR) was established.
Over the coming weeks and months, Revenue will continue to engage with the Main TALC ERR Subgroup on concerns raised and will commence widespread stakeholder information sessions on ERR. Revenue issued a Notice on the ERR information sessions to the ROS inbox of all employers (and agents) last week, with staggered invites to the information sessions due to issue to employers/agents in the coming weeks. The ERR information sessions are due to run from late August until mid-November and employers will be able to register their interest through an Eventbrite link in the invite. The sessions will be free of charge and will cover the following:
- requesting Employer Reporting Notifications by file upload;
- submitting expense/benefit details by file upload or by online form;
- viewing expenses/benefits by submission type; and
- the employee’s view of submissions made by their employer in myAccount.
Details
We have summarised the new reporting requirements below.
What is to be reported?
The new ERR will apply to the following types of payments:
- Payments to employees of the remote working daily allowance of €3.20
- Provision of small benefits to employees availing of the Small Benefit Exemption
- Payments to employees for travel and subsistence which are treated as tax free
The list of details to be reported for each benefit type can be found here.
In relation to travel and subsistence, the scope of the new reporting requirements is currently limited to payments which are made to an employee/director in respect of expenses of travel or subsistence. Where an employer pays expenses directly to the provider (e.g., company credit cards, fuel cards, toll tags, car insurance and motor tax paid directly by the employer), such payments are not currently reportable.
How?
Reporting will be through a new ERR facility on the Revenue Online Service (ROS) that will allow employers to submit, amend and correct ERR data.
As with the current reporting of payroll information, employers will have 3 options for making ERR submissions:
- ROS Online – Completion of an online file
- File upload
- Directly from within their payroll or expense management system.
Once the non-taxable payments or benefits have been submitted by employers, the details of these will be visible in the employee’s Revenue myAccount dashboard.
Revenue is currently engaging with software providers to design and develop this new facility to ensure ERR integration with Revenue’s systems. Revenue have not yet confirmed when the development stage will be completed and when the final information will be available.
When?
As things stand, employers will be required to report the details of these non-taxable benefits ‘on or before’ making the payment or the provision of reportable benefits to the employee/director.
There will be no facility for year-end or quarterly reporting or an option to do a year-end reconciliation. However, this is being discussed with Revenue through the stakeholder engagement process. Concerns have been raised around the administrative burden placed on employers for real-time reporting of vouchers and other small non-cash benefits along with clarity that many employers do not have their payroll and expense systems integrated which could lead to delayed payment of expense claims to employees.
We will provide further updates on the stakeholder engagement process in due course.
Impact on Employers
Employers need to familiarise themselves with the new requirements and begin to take steps to ensure they will be ready for the 1 January 2024 go-live date. While Revenue have indicated that they will allow for a short bedding in period, employers will be expected to get up to speed with the new requirements quickly.
We have outlined the key considerations for employers below.
Expense systems
Employers will need to develop and/or update their expense system to ensure it can capture the detail to be reported to Revenue. Where the employer’s expense system is not able to extract the required level of detail, the submission may be rejected or require a manual update of individual ERR submissions. For large companies who have their own payroll and expense technology solutions, it is currently unclear whether these systems will be compatible with the ERR facility within ROS.
‘On or before’ practicalities
The requirement to disclose reportable benefits ‘on or before’ they are paid or provided to the employees/directors means employers will need to ensure there is timely communication between the various areas of the business providing these benefits (e.g., the expense team/finance team/line management) and the team responsible for ERR (whether that is payroll or Finance or an external payroll agent).
For vouchers and non-cash benefits which will avail of the small benefit exemption, this requires that, in advance of a voucher/hamper/gift being provided to an employee or director, the relevant team or person providing that benefit must have notified the internal team responsible for ERR.
For payments to employees/directors in respect of non-taxable Travel and/or Subsistence, employers will need to consider internal processes around the timing of such payments, i.e., a set payment date per month, to ensure the relevant team responsible for ERR has been notified of the details of such payments before they are made to employees/directors.
Staff Training and Policy Updates
Employers need to review their current procedures around the relevant benefits/expenses and begin to map out processes to be followed that will enable the organisation to comply with the new requirements.
Some areas for consideration include the following:
- How frequently employers are paying out these types of payments?
- Should the frequency of these payments be standardised in light of the ‘on or before’ requirement?
- Which teams and areas of the business are making these payments and are they interacting regularly with payroll?
- Should internal controls be reviewed to ensure the relevant payments will be captured?
- Are the existing policies/procedures in respect of remote working, travel and subsistence, and the small benefit exemption compliant with current Revenue rules? For example, who is reviewing eligibility for the small benefit exemption and are awards tracked and documented to ensure no employee receives more than the allowable amount?
- Are current policies/procedures being followed in practice?
Taking the above into consideration, employers should set out a formal policy or process which sets out the roles, responsibilities and actions required from each of the relevant areas of the business.
Staff will need to be upskilled and made aware of their new responsibilities to ensure the correct information is reported at the correct time.
EY View
Lack of awareness
Revenue engagement has primarily focused on software providers other than the initial survey in early 2023. As a result, employers and other key stakeholders have not, to date, had sufficient opportunity to provide feedback, raise questions, and influence implementation design. Given the lack of practical feedback gathered from end users, it is questionable whether the new ERR facility will be fit for purpose on 1 January 2024. However, we welcome the establishment of the Main TALC ERR Subgroup and are pleased that Revenue is now actively seeking to increase stakeholder engagement through a series of information sessions.
Short lead time
Revenue have confirmed the functionality to view employer submissions in myAccount will only be available in 2024. Therefore, the design process is still ongoing and leaves employers with a very short lead time to get themselves ready for the new requirements.
Employers will need sufficient time to familiarise themselves with the new reporting requirements, update and/or develop their expense system, review current policies, roll out new policies/processes, and ensure staff are aware of, and trained up on their new responsibilities. The above timeline to view the functionality of ERR is concerning and does not allow employers a lead in time to prepare before 1 January 2024.
’On or before’ requirement
The requirement to report payments ‘on or before’ they are made puts unrealistic and reasonable administrative pressure on employers, and we anticipate that it may cause significant challenges.
Not only does it require the team responsible for ERR having knowledge of benefits before they are paid, but it will also require employers who make multiple payments of non-taxable benefits during the month to make multiple payroll submissions in that month. In an effort to streamline processes to comply with ERR, this could have a knock-on impact on employees, as reimbursing expenses as and when they are submitted by an employee will not be a viable option under ERR.
In light of the above, the Main TALC ERR Subgroup made a number of submissions to Revenue proposing that the ‘on or before’ requirement be relaxed and that Revenue consider a different reporting interval e.g., one submission could be made each month. To date, however, Revenue have indicated that there is unlikely to be any relaxation to this requirement. We will continue to engage with Revenue on this important issue.
EY Offerings
EY can help employers to prepare for and navigate these new reporting requirements. Some ways we can assist are as follows:
- Review of current policies and practices in respect of travel and subsistence, the small benefit exemption and remote working to ensure these are complaint with legislation
- Assistance with process mapping and/or the design of new policies and procedures
- Employee workshops for staff who will be involved in the ERR process
- Submission of ERR payroll reports to Revenue
Contacts
If you require further information, please call your regular contact in EY or contact any of the following:
Jim Ryan
Partner
T: + 353 1 221 2434 | E: jim.ryan@ie.ey.com
Michael Rooney
Partner
T: + 353 1 221 2857 | E: michael.rooney@ie.ey.com
Rachel Dillon
Partner
T: + 353 1 221 2554 | E: rachel.dillon@ie.ey.com
Marie Caulfield
Partner
T: + 353 1 221 1416 | E: marie.caulfield@ie.ey.com
Owen Coyle
Director
T: + 353 1 221 2970 | E: owen.coyle@ie.ey.com
Colin Spence
Director
T: + 353 1 221 1240 | E: colin.spence@ie.ey.com
Jennifer Sweeney
Director
T: + 353 1 479 4007 | E: jennifer.sweeney1@ie.ey.com
Caoimhe Neary
Director
T: + 353 1 478 6579 | E: caoimhe.neary@ie.ey.com
Waterford
Gillian Moore
Director
T: + 353 1 479 2216 | E: gillian.m.moore@ie.ey.com
Cork
Lynn Merlehan
Senior Manager
T: + 353 2 149 37695 | E: lynn.merlehan@ie.ey.com
