On 1 January 2019 PAYE Modernisation (PMOD) was introduced in Ireland. A few years earlier the UK had introduced a similar system called Real Time Information.
PMOD concerns how you report your payroll tax liability to Revenue. Prior to PMOD, this was a simple process of submitting a P35 form at the end of each financial year. If corrections needed to be made, it was easy to submit an amended P35. PMOD changed that.
Now each and every payment has to be reported to Revenue. This is akin to submitting a P35 every time payroll is processed. If a mistake is made, rather than submit an amended P35 at the end of the year, each pay period has to be amended and re-submitted starting from the time of the error.
We have yet to find any advantages with PAYE Modernisation - at least not for the Employer the Tax Agent or the Payroll software company. After its release, support increased hugely and all the payroll software companies increased their prices. During the pandemic, what should have been a simple subsidy scheme was made exceedingly complex by having to 'shoe-horn' it into PMOD. Under Revenue instruction, the user was left having to do multiple stages of reconciliation.
To make these submissions, instead of a username and password users have to use 'Digital Certificates'. Most people do not know what digital certificates are. Put simply, Digital Certificates are a way of encrypting data. For the interested, the Wikipedia article is here. Usually, the user does not even realise they are using them. For example, most websites that you access using HTTPS are using a digital certificate. However, there are few applications, (eg, online banking) that uses such a user-unfriendly manifestation of the system as Revenue does.
Unfortunately, Digital Certificates are also now the source of most of our support tickets. In response to this, we have revamped our software to give users detailed explanations of the various problems that occur with these certificates. Unfortunately, there is only so much we can do and we do not have any control over digital certificates and can not fix them. Sometimes it can take days for Revenue to fix a digital certificate problem, with the innocent user getting more and more frustrated. Consider that even at the height of the Covid wage subsidy schemes during the pandemic, digital certificate were still top of the support list.
Revenue used to use P2C text files for employee tax details. Payroll operators would download these and import them into their payroll software. There was never any problems using these as it was a simple process.
Now employers have to know what Employment IDs are and how they relate to RPNs and tax details. To further complicate matters, RPNs can be created in any number of ways. If the incorrect PRN is used, then the employee will end up over or underpaying tax.
Each processed payment now has to be submitted to Revenue at the time of payment, rather than at the end of the year (P35). The presents its own problems; Data errors (eg, unrecognised characters), digital certificate problems, the Revenue server being down (as it is multiple times a year), very slow Revenue server as it gets over-loaded, duplicate submissions and we've even had submissions completely disappear!
It used to be easy to correct payroll returns. If an error was made, then a P35 could be re-submitted with the appropriate correction. Some tax advisers directly edited the text document and submitted that. P35s could even be submitted as a paper document.
As we now all have to live with this new system, we have designed Cloudpay to 'hide' or automatically correct as much as we can to make PAYE modernisation as pain free as possible.
We have gone through multiple phases of designing, and redesigning the way Cloudpay handles Digital certificates, RPNs, Employment IDs and submissions. We have been able to reduce support and make the whole system as easy to use, despite the complexities of PMOD.