If your business has employees, you need to ensure that your systems and processes are ready to capture and report information about three key categories of non-taxable employee remuneration. Changes come into effect from 1st January 2024 that make Enhanced Reporting Requirements (ERR) obligatory for employers and come on top of payroll reporting. Read on to see what’s involved, plus our top tip for minimising the work involved.
What are the Enhanced Reporting Requirements (ERR)?
The Enhanced Reporting Requirements (ERR) in Ireland mark a significant milestone in payroll and tax reporting for employers. These new regulations mandate a more detailed and timely disclosure of specific non-taxable benefits and expenses provided to employees and directors. They are designed to enhance transparency, ensure compliance, and streamline the process of tax reporting for employers. Like payroll reporting, this will require detailed benefit reporting on an employee-by-employee basis. Employers will need to link payments to key identifiers such as the PPS number, date of birth, and Work ID of the employee.
What payments are covered by Enhanced Reporting Requirements (ERR)?
Section 897C of the Finance Act 2022 is extending the reporting obligations of employers to include additional, non-taxable, payments made by employers to their directors and/or employees (but not contractors). In this initial phase, the following three primary categories of payments must be reported on to Revenue, starting from 1st January 2024.
1. The Small Benefit Exemption ERR
- What is it? The Small Benefit Exemption scheme allows you to reward employees with non-cash benefits. [The following is edited to provide correct limits since 1st January 2025] An employer can provide up to five such benefits in a year as long as the combined value of gifts does not exceed €1,500, without incurring any tax liabilities (cross either threshold and the whole amount becomes taxable).
- What needs to be reported? Employers must report the date of payment and the value of each small benefit provided, ensuring that the total value and number of benefits stay within the allowed limits.
2. Remote Working (EWorking) Daily Allowance ERR
- What is it? This allowance is a tax-free payment that can be made to employees for each day they work away from the company’s office(s). Introduced during the pandemic, the rate is set at €3.20 per day, subject to certain conditions for tax exemption (click through to our blog for more information).
- What needs to be reported? When providing this allowance, employers must report the total number of days for which the allowance is paid, the amount paid for each of those days, and the date of payment.
3. Travel and Subsistence ERR
- What is it? This category includes payments made by employers to employees to reimburse them for business-related travel and subsistence costs. It covers both vouched and unvouched expenses, including site-based allowances, emergency travel, and eating on-site allowances.
- What needs to be reported? Employers must report the date and amount of each payment under this category. This includes detailed reporting for vouched and unvouched travel and subsistence expenses, site-based employee allowances, emergency travel allowances, and eating on-site allowances.
Why are the Enhanced Reporting Requirements (ERR) needed?
This detailed reporting aims to enhance transparency and compliance with tax regulations. It’s a natural next step after PAYE Modernisation in 2019 given that payroll tax compliance is an ongoing focus for Revenue. This additional data will be analysed so that Revenue can better identify trends and anomalies, helping them to divert resources away from compliant employers to focus on those that aren’t. Another outcome of this reporting is that it will inform future tax policy. This is being described as ‘phase one’ of ERR, indicating that additional reporting may be implemented in future phases.
From an employee’s perspective, ERR will reassure them that their income is being reported properly to Revenue and that any payments made outside of their payroll is tax compliant. With a better sense of the non-taxable benefits and allowances they receive they will have a fuller understanding of their complete remuneration package. All this information will be centralised in the individual’s Revenue account (myAccount or ROS) to aid personal financial planning or tax-related decisions.
When must Enhanced Reporting Requirements (ERR) submissions be made?
ERR returns are separate to any payroll filings but will follow similar real-time reporting principles. Importantly, all required information will need to be collated and submitted prior to payment or delivery of a reportable benefit. Revenue’s real-time reporting approach aims to enhance the accuracy and timeliness of tax-related information. This ‘on or before’ requirement is a critical aspect of ERR. Any non-payroll payments must be reported electronically to Revenue (via ROS) before or on the same day they are paid to the employee.
For SME owners, in particular, this means new operational and administrative challenges. If making multiple payments during a given month, this will mean multiple submissions to ROS to comply with the ‘on or before’ requirement. Reimbursing expenses as and when they are submitted by an employee will no longer be viable once ERR comes into effect. In addition, whoever does the ERR reporting in your company must have knowledge of any benefits before they are paid. New processes will be required to ensure information is moving correctly through the business to facilitate timely and accurate reporting.
How are Enhanced Reporting Requirements (ERR) submissions made?
The Revenue Online Services (ROS) platform will facilitate the submission of these details, similar to how the current payroll reporting system works. Employers can submit payment details on ROS from December 2023. Third-party software providers are working to integrate these requirements into their systems so that returns don’t have to be filed manually; but you can easily file manually on ROS just like filing a VAT or other return.
Many of our clients are using either Parolla or SimplePay for their Irish payroll needs. Both these companies have been working to add this new reporting type to their software so that employers can use their software to submit both payroll and ERR, but we don’t know if they will be ready by 1st January. Hopefully, we will see fully integrated features come onstream next year, such as automated reporting via API integration with ROS, direct reporting of ERR payments on payslips, and a standalone ERR process for submissions outside the normal payroll cycle.
Whether you use software to track and submit returns or do it manually, we strongly recommend you keep thorough records of all payments to employees, with all vouched receipts on file in case Revenue selects you for an aspect query. The onus is on you as the employer to track non-taxable payments to employees and to declare and pay tax on anything that passes out of that scope.
For the complete guidance from Revenue, download their Enhanced Reporting Requirements manual (PDF).
How should I prepare for Enhanced Reporting Requirements (ERR)?
To prepare your business for ERR, consider the following practical steps:
- Review your data collection methods: Review how you currently gather information about non-taxable benefits. If you’re still using manual processes, it might be time to consider more automated solutions to streamline this task.
- Engage with your software providers: If you use third-party payroll (SimplePay, Parolla, etc.) or expense management software, reach out to your provider to ensure they are updating their systems in line with the new ERR requirements.
- Assess your integrations: You might want your current systems for tracking payments to employees to integrate with either ROS or your payroll software. Alternatively, you might want to see how your payroll software could be used to replace your current system if that will make the process simpler.
- Educate your staff: Ensure that the team members responsible for processing employee payments are well-informed about the new requirements. This includes understanding what needs to be reported on and the importance of accurate data entry.
- Implement tracking processes: Develop or refine your process for tracking and allocating reportable benefits accurately. This step is crucial to ensure ease and accuracy of reporting.
- Review payment timeframes: With the ‘on or before’ reporting requirement, you might need to adjust how and when you process non-taxable payments. If you have an on-demand expense payment policy, this might need restructuring to align with the new reporting timelines.
In these final weeks of the year, making sure you are ready for ERR should be a priority. Review your current systems, understand how the reporting requirements translate in your business, and align your internal processes and policies accordingly. You may feel that this additional layer of complexity, on top of payroll management, makes outsourcing an attractive proposition. However, you will still need time to get set up with an external payroll service and nail down a process for passing them information about payments to employees in an efficient and effective manner.
Our top tip for minimising the impact of ERR
The above is a comprehensive overview of what ERR is for and what your new obligations are from 1st January 2024. However, it’s important to note that ERR is ONLY about payments you as the employer make to your employees or directors. Anything that is purchased by the company directly – for example, using the company credit card – falls outside the scope of ERR. This is particularly interesting for travel and subsistence expenses, which can become voluminous very quickly and would require additional monthly bookkeeping time to track, record, and report on. Our advice is to consider giving employees cards they can use for business-related purchases (read our blog for an explanation of how to make this easy using the example of Xero and Revolut).
