By Claire Davey (pictured)
& Odhran O’Ceallaigh, KPMG

Businesses around the country are this week turning their attention to the often mundane and sometimes stressful task of completing annual, year-end P35 returns. Over the coming days, they will be faced with a number of tasks to ensure an efficient and effective payroll year-end process. Outlined below are the key filing dates employers should be aware of and some year-end filing tips to alleviate some of the difficulties that employers may be faced with.

Key Dates 

 *Extension: On a concessional basis, this deadline is extended to 23 February 2016 where throughout 2015 an employer has: filed all monthly P30 returns through Revenue Online Service (ROS), and made all PAYE tax payments through ROS.

Housekeeping tips for employers completing P35 return

• Prepare a year-end checklist and ensure that all appropriate adjustments have been made during the year, and at the year end.
• Check all leavers and joiners have been accounted for correctly on the payroll and make sure that all employee records have been kept up to date during the tax year.
• Review all payments paid to employees from the Department of Social Protection
• Where an employer received an instruction from Revenue to deduct local property tax (LPT) from an employee, ensure the correct amounts have been included.
• Each employee’s PAYE/USC/PRSI record must be completed accurately. An entry must be made for each employee employed at any time during the year ended 31 December (this includes all leavers and joiners during the year).
• Ensure that pensions are recorded and amounts are entered correctly, including details of any employer and employee pension contributions. Where an employee is a member of an Approved Occupational Pension Scheme, the employee’s pension tracing number has been included.
• Where a week 53 payment arose (if there was a pay date on 31 December) employers should check to ensure this was handled correctly and that all entries reflect this.
• A final review of all benefits in kind (BIKs) provided to employees during the year should be carried out and any necessary adjustments made prior to filing the P35.
• Where an employer pays medical insurance on their employees behalf, check that the correct gross premium has been taxed through payroll as BIK and that the amount eligible for tax relief has been included.
• A review all employee share based remuneration i.e. approved profit sharing schemes, restricted stock units, restricted shares, share awards, SAYE schemes, to ensure that all payroll withholding obligations have been met during the year.
• Where an employee falls into two or more PRSI contribution classes, or subclasses in a tax year, details of the number of weeks of PRSI contributions at each class must be recorded and submitted to Revenue on the annual P35 return.
• All employees who have a PAYE exclusion order in place should be included on the P35 return. Any PRSI deducted from their salary should also be recorded on the P35.
• A review of the year-end final figures per employee PAYE records and payroll reports should be carried to ensure taxes deducted during the year correspond with the actual payments paid to Revenue.

Other considerations

Illness benefit  PAYE must be collected on taxable illness benefit, whether paid to an employee or mandated to an employer, through the PAYE system. PRSI or USC is not due on illness benefit. The DSP use Revenue’s ROS in-box facility to provide employers with notifications of taxable illness benefit. Employers should be aware that there can be delays in notifications being sent to the ROS inbox.

Where letters are sent to the employee, they should pass on the notification letters to their employer. Where the payroll is outsourced, employers should pass on any notification letters received to their agent. In light of this, employers should carry out a review of illness benefit to ensure that it has been handled correctly through the payroll in 2015. Any illness benefit relating to 2015 which has not been included in the 2015 payroll an adjustment may be necessary to ensure the correct tax treatment, prior to filing the P35.

P60s   Each employee in employment with the company at 31 December 2015 should also be furnished with a P60 for 2015 by 15 February 2016. This can be done in tandem with the finalisation of the P35.

PAYE underpayment owing at year end  Revenue recognises that minor adjustments can arise with small balances being settled at the year end. Therefore, any underpayment of PAYE by employers for 2015 must be paid with the P35. Where the underpayment does not exceed 10% of the liability for the year, interest will not be charged by Revenue.

In Association with

However, if there is a balance of more than 10% of the liability for the year, Revenue can charge interest for late payment. On the basis that the correct P30 liability has been paid on a monthly or quarterly basis throughout the year, no liability should be due with the annual P35 return.

Alterations to Annual P35  If an employer discovers that they have made an incomplete or incorrect P35 return, it is important that a supplementary, amended or self-correction return is filed without delay. A supplementary P35 return can be filed where an employee has not been listed on the original P35 return where as an amendments to P35 changes the P35 declared liability and/or the employee details entered on the original P35 return.

Where an employer’s discovers an error/oversight after the submission of their P35 annual return, the Revenue’s Code of Practice allows for employers who wish to self-correct the return and regularise the position to do so without penalty. However, interest will be due where the self-correction facility is used. Where an employer wishes to use the self-correction facility for 2014, a self-correction return must be filed before 15 February 2016.

2015 Special Assignee relief program (SARP)  Employers who had employees who availed of the SARP relief in 2015, are reminded that the deadline for the 2015 SARP return is also approaching. Employers must file their 2015 SARP return by 23 February 2016.

PAYE settlement agreements (PSAs)  A PSA is an arrangement with Revenue whereby a company can settle tax liabilities in respect of BIK items which are small and irregular, and in non-cash form, outside of the normal payroll and PAYE process. Under a PSA, the tax must be calculated on a gross-up basis. In other words, the BIK value is being treated as the net after tax amount.

The relevant liability for 2015 must be paid by the 2015 P35 filing deadline of 15 February 2016. Therefore, now is also the time for employers to finalise computations to be submitted to revenue together with payment.