PAYE modernisation and Christmas holidays

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DB74

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Anyone else having an issue with this?

- Employer finishing up tomorrow
- Employer closed until Mon 06-Jan
- Employer wants to pay 3 weeks wages to employees tomorrow to cover next 3 weeks (as they have done over the last number of years)

However employees only have 2 weeks tax credits remaining in 2019 so

- If employers pays 3 weeks wages now then employee gets hammered for tax for 3rd week as no tax credits left in 2019, and
- Employee has no wages for Week 1 of 2020 (w/e 02-Jan-2020) which means no PRSI stamp for Week 1 of 2020

Am I missing a trick here?

EDITED TO ADD - this employer is in the construction industry so I assume that this problem is going to be very common in that industry
 
What happened in the past?

There are only two weeks left in 2019 so you should be paying them just for two weeks.
Pay the first week in January in January.

Or am I misunderstanding your question?

Brendan
 
If I understand it, this should have been an issue in 2018, when PAYE should have been on a receipts basis? It's just being highlighted now because of PAYE modernisation.
 
I suppose what happened in the past is that the employer paid the first week of January together with the December wages, essentially as a prepayment
 
What did they do for the first week of this year?
If I have it right, staff didn't get paid, because they received pay before Christmas?
 
DB74 said:
I suppose what happened in the past is that the employer paid the first week of January together with the December wages, essentially as a prepayment
Click to expand...

And did you not have the same issue? Two weeks' credits for three weeks' pay?

What has changed with modernisation?

Brendan
 
DB74 - we have the same issue. We are paying as follows: Week 51/52 payment of holidays and bank holidays due, this will be paid on 23/12 and use 2 week's tax credits. Week in hand (work completed this week) will be entered in payroll 2020 week 1 for week end date 29/12 and paid on 2nd Jan so it falls within the 2020 year. We can set the payments up in the bank in advance to go out on these dates, but will need to keep an eye on them to make sure they go through.
 
I think there was a tax appeals case on this this year where it was made clear, income is to be assessed to when its received and not accrued. It can cause issues with unused credits etc.
 
Hi,

Revenue have published a "Hot Topics" document that covers this on their website at


Now, this relates to the transition from 2018 into 2019, but the principles are the same.

You cannot allocate a 2020 tax credit to a payment that you make in 2019. If you pay in 2019 you must report in 2019, and you cant borrow credits from 2020 in 2019. Revenue have a very simple mantra - follow the money (i.e. not when earned, but when paid)

If you want to pay the employee with 3 weeks wages in 2019, you can only allocate credits up to week 52 (assuming that you don't have a valid Week 53 situation) which in your case means two weeks credits.

Now, if you do this then you should remember that your next Payroll would be the 10th January which is in Week 2, so your employees would get the benefit of two weeks credits in their first 2020 wages - so in the end it balances out, however I accept that most employees wont like it!!!

Your only other option is to split your 3 weeks of wages into two separate payments. The first covers Week 51 and 52 which you make on 20th December with two weeks of credits - normal holidays in advance situation.

Then you do a separate payroll run for 2nd Jan where you can actually allocate the 2020 Week 1 credit.

Sorry its so convoluted, but that's the way it is.

Regards

Jason
 
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