The Association of Chartered Certified Accountants (ACCA) has announced a post-Christmas headache for thousands of people across the country as they face emergency taxes of up to 51%. This is due to modernisation methods being undertaken by the Revenue.
The news was reported across almost all news outlets in the republic in the past week as the scale of the problem emerged. Spokespeople from the ACCA believe that the number could rise substantially as they continue to gather information on employees.
Why are people being emergency taxed?
The problem has emerged due to incorrect or insufficient information being supplied to revenue by employers on behalf of the employee. This may be anything from an incorrect PPS no to having a second job.
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.” reported the Irish Independent.
Under a modernisation of its PAYE systems, Revenue required employers to submit a list of their employees with their details by the end of October last. Revenue said that details for more than 820,000 individuals have been reported, with 10,660 employees seeing an emergency tax of 51 per cent applied reported the Irish Times.
Some experts at the ACCA believe the number of people placed on emergency tax may rise to over 120,000 in the coming weeks as the PAYE systems continue to be rolled out and employees records are added to the database noted the Irish Times. This may cause huge issues for many post-Christmas.
The initial impact is set to affect those who receive a weekly wage slip which would have been sometime this week as the starter of the financial year.
The reason for the update is to streamline the tax system in Ireland and modernise PAYE in the biggest shake-up since the 1960s. It is hoped the modernisation will increase the revenues coffers by an estimated €50 million per year, around €220 per employer throughout the state.
The new systems have been designed so that employers can update employee information on a regular basis rather than once a year which was the norm up until recently. Before the new system, employers were required to submit a detailed payroll form known as the P35. The new online system should make updating information easier once this initial problem is resolved.
The new system will eliminate the need for forms such as the P30, P45, P46, P60 and P35 returns as information will be returned to Revenue instantaneously as the process moves online noted the Irish independent. Having not been updated much since the 1960s the update has been long overdue.
Employers will now have to update employees details during the payments period which may be either weekly or monthly. Although those who are paid weekly are urged to update their detail as soon as possible to ensure they to are not impacted by the new system.
The timing and lack of information to employees have been criticised in the past week as many employees have been left out of pocket in the important post-Christmas period.
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.”
Advice for those affected
As many people would know emergency tax is usually applied when a person is taking up new employment and their information has not gone through the channels just yet. But as the Revenue sought records for employees in October 2018 the problem has multiplied. The best course of action for those affected is to update your information via My account on the Revenue page.
Stephen O’Flaherty also warned employers not to give handouts to employees over the coming weeks and allow for the new systems to correct itself once the employee has updated their information.
As it may take several weeks for overpayments to be returns it is advisable for those affected to update their information as soon as possible to ensure returns occur as soon as possible.
At the moment it is not believed that the new system will affect employee tax rates and the system should work to benefit the employee. The goal of the new system is to reduce end of ear Tax filing and create an efficient system that works throughout the year ensuring that PAYE is paid correctly.