Ireland – Year-end payroll considerations

The end of the year is particularly busy for those involved in payroll matters. In this Alert we look at what needs to be done to ensure compliance with your 2024 payroll obligations as well as looking forward to what needs to be done in early 2025.

In-year payroll amendments

Now is the perfect time to review your payroll submissions for 2024 and check if all payments were processed through payroll appropriately. For example, if you have employees with company cars have you checked the BIK was processed in line with the correct mileage? There is an expectation on Revenue’s part that employers undertake a payroll self-review or “health-check” on a regular basis. This allows employers to identify any shortfalls in their employment tax processes and take remedial action early without having to submit an Unprompted Voluntary Disclosure to Revenue and pay a penalty. Dealing with any payroll amendments in-year allows you to identify the issue early and to minimize any underpayments of tax as well as the interest on late payment. Alternatively, these shortfalls can be dealt with under self-correction without penalty as long as the following conditions are met:

• Revenue is notified within the applicable time limit (for PAYE returns this is before the Corporation Tax deadline for that payroll period);
• A calculation is submitted outlining the correct tax and interest payable; and
• Payment accompanies the submission in full.

How can EY help?

Our team of employment tax specialists can work with your stakeholders to undertake a PAYE Health-Check and identify any potential areas of non-compliance. This will allow you to deal with these matters promptly. We will also advise on process improvements to ensure your payroll compliance is in line with evolving Revenue practice.

Year-end payroll considerations

Employers must ensure that the payroll software has been updated for 2025 before the end of the year and successfully tested. Furthermore, an important year-end consideration is the PAYE Settlement Agreement which is outlined below.

2024 PAYE Settlement Agreement (PSA)

Background

In recent years, Revenue has had an increased focus on employment tax compliance and therefore internal payroll controls and checks are critical. Internal communication is necessary to ensure the relevant teams are aware of all payments and benefits made to employees so that they can assess the company’s payroll obligations. This is particularly important in 2024 with the introduction of Enhanced Reporting Requirements (ERR) which requires companies to report certain non-taxable expenses to Revenue on or before the payment of the expense. It may be possible to deal with any payments that were not processed through payroll via the PAYE Settlement Agreement (PSA) facility.

What is a PSA?

The PSA allows employers to capture certain qualifying benefits for income tax, USC and PRSI purposes outside of the payroll system. Many businesses will provide certain benefits to their employees that are intended to motivate or reward them, such as staff entertainment, small gifts and prizes. Whilst there are exceptions – and use of these should be considered – many of these benefits are liable to income tax, USC and PRSI through payroll in line with the relevant reporting deadlines. A PSA is an administrative arrangement allowing employers to pay the income tax, USC and PRSI on behalf of their employees on certain non-cash benefits, rather than reporting them in the payroll. It helps employers to ensure compliance with their payroll and reporting obligations.

What can be included?

A PSA allows an employer to settle the income tax, USC and PRSI outside of payroll in respect of non-cash benefits provided to employees/directors where the benefits provided are:

1. Irregular – This refers to items not paid at regular intervals over the course of a tax year.
2. Minor in nature and amount – There is no pre-determined limit to the value, but it might include items such as small gifts and vouchers to mark good work or special occasions which are not otherwise covered by the small benefit exemption.
3. Impracticable – Items where it would be difficult to allocate a value to individual employees would fall into this category. This would typically include the costs of a staff entertainment event with several employees in attendance.

The items that are typically included in a PSA may vary by employer, but some typical examples include:

• Taxis for non-business purposes
• Staff entertainment / lunches
• Staff awards/gifts such as for weddings, birthdays or Christmas, where the small benefit exemption has already been used
• Gym Memberships.

These items are generally taxable but it may be difficult to report them through payroll on a real-time basis. Therefore, the PSA provides a practical solution for employers to stay compliant with their reporting and payment obligations. Additionally, the PSA allows the employer to cover the cost of the income tax, USC and PRSI on these benefits rather than deduct this cost from the employee or director.

Revenue will not accept cash payments or large, regular benefits such as company cars, medical insurance and professional subscriptions to be included in a PSA. These must be reported through payroll.

The process of reviewing expenses data and filing the ERR submissions should assist employers in the collation of information to be reported on the PSA. For example, where the small benefit exemption has been used in relation to an employee this must be reported under the ERR regulations. However, any additional awards made to the employee on which the small benefit exemption cannot be claimed can be reported on the PSA.

The deadlines

It is necessary to make an application to Revenue each year to avail of the PSA facility. The 2024 PAYE Settlement Agreement (PSA) application deadline is 31st December 2024 which is fast approaching. Employers should take the opportunity to review their records to identify any taxable non-cash benefits provided to employees/directors on which income tax, USC and PRSI was not operated and remitted to Revenue through payroll and meet the criteria to be included on a PSA.

The 2024 PSA must be submitted, and the grossed-up taxes paid, by 23rd January 2025. 

How can EY help?

EY can assist by working with your team to conduct a full review of expense reports to identify any benefits that are reportable on a PSA. We can also work with you in applying for approval to submit a PSA, preparing the PSA calculations and submission letter to Revenue as well as dealing with any follow-up issues that may arise. We also provide many clients with a managed service approach to meeting their ERR obligations and our employment tax experts can help you understand the extent to which tax exemptions may apply. Our years of experience in negotiating with Revenue will help you manage the overall tax cost of the PSA.

We can also help you plan to make tax efficient use of your budget for staff incentives and entertaining so that as much as possible can be spent on rewarding your staff.

Actions for 2025

At this time of year, it is also important to look forward to the next year to identify what actions need to be taken.

It’s important to remember that payroll operates on a paid basis and therefore any payments made in 2025 for services earned in 2024 should be reported through payroll in 2025. The Revenue Payroll Notification (RPN) on file for 2025 must be applied. This may be particularly relevant given that many employers pay their employees early in December and for example may not have paid for overtime earned in the latter part of the month. The 2025 RPNs should be issued by Revenue in early December 2024 and must be followed – if an employee does not have an RPN for the new year the emergency basis of tax must be applied.

It is also important to track any cases where an employee has received a benefit-in-kind but received insufficient net pay to pay the taxes on the benefit. The employer must still pay the full and correct amount of tax to Revenue and collect the balance from the employee. If there is a balance outstanding from an employee in 2024 this must be collected from the employee or be treated as a taxable benefit arising on 28 February 2025.

From 1 January 2025 Revenue may apply penalties for non-compliance with the Enhanced Reporting Requirements (ERR) regime. Under ERR, Revenue requires employers to report certain non-taxable benefits on or before the date of payment. The regime was introduced from 1 January 2024 but Revenue has confirmed that penalties for non-compliance will only be introduced from 1 January 2025. If your organization continues to struggle with compliance with ERR it is essential that you take action now. Your EY client service team would be happy to assist you in meeting your ERR obligations.

Conclusion

The approach to Christmas is a very busy time for payroll teams but taking the appropriate action now can ensure your organization is compliant. EY has a large team of experienced employment tax specialists ready to assist you with not only the year-end obligations but also in getting ready for the new year.

Contacts

If you require further information, please call your regular contact in EY or contact any of the following:

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

Sarah Connellan
Partner
E: sarah.connellan@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

Elaine O’Gara
Director
T: + 353 087 490 2947 | E: elaine.o.gara@ie.ey.com

Jake Higgitt
Director
T: + 353 21 480 2877 | E: jake.higgitt@ie.ey.com

Gareth Carroll
Director
E: gareth.carroll@ie.ey.com

Waterford

Gillian Moore
Director
T: + 353 1 479 2216 | E: gillian.m.moore@ie.ey.com

Louise Cadogan
Director
T: + 353 5 184 0358 | E: louise.cadogan@ie.ey.com

Cork

Peter O’Connor
Director
T: + 353 2 148 02843 | E: peter.oconnor@ie.ey.com

EY Law

Deirdre Malone
Partner
T: +353 21 480 5729 | E: deirdre.malone@ie.ey.com