Employers must report a lot more about tax-free payments made to employees from the start of this year.
Michelle Egan C.T.A., Tax Manager with DHKN, looks at what employers and payroll departments need to look out for.
WHAT ARE THE ENHANCED REPORTING REQUIREMENTS (ERR)?
A new Enhanced Reporting Requirements (ERR) has come into effect from 1 January 2024. From this date, details of certain non-taxable benefits must be reported to Revenue on or before any payment is made to the employee/director.
WHAT INFORMATION MUST BE REPORTED?
The following tax-free payments/benefits made to employees/directors are deemed ‘reportable benefits’ under the 1st phase of ERR:
Small benefit exemption
An employer will be required to report the date paid and value of this benefit.
It is important to note that while the maximum tax-free benefit an employer can give to an employee in a year is €1,000, no more than two small benefits can be given to an employee in a year. If more than two benefits are given in a year, only the first two will qualify as tax-free.
Revenue notes that all benefits, that meet the conditions to qualify for the small benefit exemption, must be reported and include, inter alia, the following:
- Gifts for the birth of a child/marriage or other special occasions
- Gifts on retirement
It is important to note that two small benefits can be given to an employee in a year and the combined value of the two benefits cannot exceed €1,000 to avail of the exemption. Where more than two benefits are given, only the first two benefits can qualify as tax-free and any later benefits should be taxed through the payroll.
For example, if an employee receives two small gifts early in a year (e.g. flowers and an Easter egg), they would have received the maximum two small benefits for the year and any further benefits received (e.g. a voucher at Christmas), would be taxable.
Remote Working Daily Allowance
Where a Remote Working daily allowance is paid, an employer will be required to report the following:
- total number of days
- amount paid and
- date paid.
Travel and Subsistence
The following travel and subsistence items must be reported, including the date paid and amount of each payment:
- travel vouched (receipted)
- travel unvouched (up to civil service rates)
- subsistence vouched
- subsistence unvouched
- site based employees (including “Country Money”)
- emergency travel and
- eating on site allowance.
ERR will only apply where travel & subsistence expenses are reimbursed directly by an employer to an employee. Therefore, where travel & subsistence is paid for by an employee using a company credit card, charge card or similar, this does not have to be reported through ERR; but the expense must still satisfy the normal conditions that apply to the reimbursement of expenses.
THE SIGNIFICANCE OF REAL-TIME REPORTING
Where an employer makes a payment under one or more of the categories above, they must report the details of the payments to Revenue on or before the date of payment to the employee/director.
The requirement to now submit real-time reports is a significant change and will lead to extra administration for an employer. An employer should therefore review their payment procedures and determine how best to manage the frequency of payments to minimise the administration of same.
HOW TO REPORT THE INFORMATION TO REVENUE?
Reporting is through a new Enhanced Reporting Requirement facility on the Revenue Online Service (ROS), similar to that used for payroll reporting.
An employer will have three options for making Enhanced Reporting Requirement submissions:
- Completion of an online file
- File upload
- Through a third-party software provider.
Employees will also be able to view information submitted by their employer through their myAccount portal.
WHAT SHOULD EMPLOYERS DO?
It is important to note that the tax rules on tax-free payments has not changed, they just now need to be reported to Revenue on a real time basis. Revenue will therefore have increased visibility of tax-free payments.
Employers should ensure they do the following:
- Review their policies in relation to the reimbursement of expenses and provision of benefits to ensure they continue to have sufficient practices and controls in place to comply with Revenue requirements.
- Retain sufficient back up documentation to support the tax-free payments.
WHAT IS COMING NEXT ?
Revenue has stated that the new reporting requirement are phase 1 and it is expected that additional reporting requirements will be introduced in due course.
Revenue has also advised that they will adopt a ‘service for compliance’ approach until 30 June 2024. This will involve supporting employers who are attempting to comply with their reporting obligations, and they will not operate any compliance interventions or seek to apply any penalties for non-compliance in relation to the ERR during this period. It is important to note however that employers are expected to comply with the new reporting requirements with effect from 1 January 2024.
Please contact us if you have any queries or require any assistance in relation to the Enhanced Reporting Requirements. firstname.lastname@example.org