Navigating the legal landscape of Enhanced Reporting Requirements (ERR) in Ireland is essential for businesses to ensure compliance and avoid penalties. Understanding the legal framework, entities subject to these requirements, reporting obligations, and potential consequences for non-compliance is crucial. This article provides a comprehensive overview of ERR in Ireland, offering insights into its legal framework, reporting obligations, and a comparative analysis with other countries’ regulations.

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Overview of the Enhanced Reporting Requirement (ERR).

The Enhanced Reporting Requirement (ERR) is a significant development in the realm of employer reporting obligations in Ireland. Introduced by Section 897C of the Finance Act 2022, ERR aims to enhance transparency and compliance with tax regulations by mandating employers to report specific non-taxable payments and benefits provided to employees and directors. 

Effective from January 1, 2024, employers are required to report the following categories of payments and benefits:

  • Small Benefit Exemption: 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.
  • Remote Working (EWorking) Daily Allowance: 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.
  • Travel and Subsistence: Employers must report the date and amount of each payment under this category, including detailed reporting for vouched and unvouched travel and subsistence expenses, site-based employee allowances, emergency travel allowances, and eating on-site allowances.

The legal basis for the ERR is Section 897C of the Taxes Consolidation Act 1997, introduced by the Finance Act 2022. The Minister for Finance signed the commencement order on December 13, 2023, to implement the ERR from January 1, 2024.

Entities Subject to Enhanced Reporting Requirements 

All employers, including charities, who provide the specified non-taxable benefits are subject to ERR, regardless of their size or industry. This includes employers with employees or directors who are subject to a PAYE Exclusion Order, as the ERR reporting requirements are separate from the standard payroll reporting obligations.

Reporting Obligations under Enhanced Reporting Requirements

Employers must report the following information to Revenue on or before the date of payment to the employee or director:

  • Remote Working Daily Allowance: Total number of remote working days, amount paid, and date paid.
  • Small Benefit Exemption: Value of the benefit and date granted to the employee or director.
  • Travel and Subsistence: Amount paid, and date paid for each of the following subcategories:
    • Travel vouched or unvouched.
    • Subsistence vouched or unvouched.
    • Site-based employees (including “Country Money”).
    • Emergency travel.
    • Eating on-site.

Implementation & Reporting Mechanisms of ERR

While reporting employers must provide a valid Personal Public Service Number (PPSN) and employment ID for each employee or director. If a PPSN or employment ID is not available, the employer must provide the employee’s address, date of birth, and employer reference instead. 

Employers can report the required information through various mechanisms:

  • Direct reporting through software packages: Third-party software providers, such as payroll and expense management systems, are working to integrate ERR reporting capabilities into their platforms to streamline the reporting process. Software that integrates with Revenue systems, will enable employers to report non-taxable payment information directly.
  • ROS file upload: The Revenue Online Service (ROS) platform will facilitate the submission of ERR details, similar to the current payroll reporting system. Employers can upload files in JSON or XML format containing the required information to their Revenue Online Service (ROS) account. 
  • ROS online form: Employers can also manually file ERR submissions on ROS, similar to filing VAT or other returns into a dedicated ERR portal on ROS. 
  • Timely Reporting: A critical aspect of ERR is the ‘on or before’ requirement, which mandates employers to report the necessary information prior to or on the same day as making the payment or providing the benefit to the employee. 

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Guidelines for Employers to Prepare for ERR in Ireland

To ensure a smooth transition to the Enhanced Reporting Requirement, employers in Ireland should consider the following guidelines:

  • Review Data Collection Methods: Assess and enhance existing processes for gathering information about non-taxable benefits and expenses to ensure accurate and comprehensive data collection.
  • Engage with Software Providers: Reach out to third-party payroll, expense management, or other relevant software providers to ensure their systems are being updated to accommodate ERR reporting capabilities.
  • Implement Tracking Processes: Develop or refine processes for accurately tracking and allocating reportable benefits and expenses to facilitate ease and accuracy of reporting. 
  • Staff Education and Training: Ensure that team members responsible for processing employee payments are well-informed about the new requirements and trained on any new software or processes implemented.
  • Review Payment Timeframes: Adjust the timing and frequency of processing non-taxable payments to align with the ‘on or before’ reporting requirement of ERR.
  • Conduct Pilot Testing: Run a trial run of the updated reporting process before the official implementation to identify and address any issues or gaps.
  • Establish Support Systems: Set up dedicated support structures within the organisation to assist employees with questions and provide guidance during the transition.
  • Maintain Compliance: Regularly review and audit the reporting process to ensure ongoing compliance with ERR and address any issues promptly.

Penalties for Non-Compliance with ERR in Ireland

Failure to comply with the Enhanced Reporting Requirement can result in various penalties and consequences for employers:

  • Financial Penalties: Non-compliance can lead to financial penalties, which may increase if the mistake is not corrected promptly. The Revenue Commissioners are drafting regulations that will include fixed penalties for non-compliance with ERR.
  • Reputational Impact: Non-compliance can tarnish a company’s image, potentially leading to a loss of trust and future business opportunities.
  • Operational Disruptions: Addressing non-compliance issues can be time-consuming and resource-intensive, diverting attention from regular business activities and leading to operational inefficiencies.
  • Legal and Regulatory Consequences: Persistent non-compliance could escalate to more severe legal and regulatory consequences, such as audits, investigations, or legal action.

Non-compliance with ERR can lead to penalties and interest charges. However, Revenue has adopted a “service for compliance” approach until June 30, 2024, to support employers in their transition to the new reporting regime. During this period, Revenue will not initiate any formal compliance interventions or seek to apply penalties for non-compliance. 

After June 30, 2024, employers who fail to engage with Revenue or persistently breach the PAYE regulations are liable to a €4,000 penalty per offense under Section 987 of the Taxes Consolidation Act 1997.

Advantages of Enhanced Reporting Requirement for Irish Businesses

While the Enhanced Reporting Requirement introduces additional reporting obligations for employers, it also offers several advantages:

  • Increased Transparency: ERR enhances transparency by providing a clearer picture of non-taxable payments and benefits, enabling better compliance and informed policy decision-making.
  • Streamlined Compliance: By aligning with the principles of PAYE Modernisation and real-time reporting, ERR aims to divert Revenue’s resources away from compliant employers, allowing them to focus on non-compliant entities.
  • Employee Assurance: ERR provides increased visibility and assurance to employees regarding the proper reporting of their non-taxable income, fostering trust and transparency.
  • Informed Tax Policy: The data collected through ERR will inform future tax policy decisions, potentially leading to more effective and equitable regulations.

While the implementation of ERR may present challenges, such as increased administrative burdens and the need for process adjustments, it represents a significant step towards enhancing tax compliance and transparency in Ireland.

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Comparison of Ireland’s ERR with Other Countries’ Reporting Regulations

While the ERR in Ireland is a unique regulatory framework, it shares similarities with reporting requirements in other countries aimed at enhancing transparency and compliance in the provision of non-taxable employee benefits.

For example,
In the United Kingdom, employers are required to report certain benefits in kind and expenses payments to Her Majesty’s Revenue and Customs (HMRC) through the PAYE Settlement Agreement (PSA) process. The PSA allows employers to settle the tax and National Insurance contributions on certain expenses and benefits provided to employees.

In the United States, employers are required to report certain fringe benefits, such as employer-provided vehicles, on Form W-2, which is used to report an employee’s annual wages and the amount of taxes withheld from their paycheck.

While the specific reporting requirements and mechanisms may vary across countries, the underlying objective of enhancing transparency, compliance, and data collection for policy considerations regarding the provision of non-taxable employee benefits is a common theme.

Key Takeaways

  • The Enhanced Reporting Requirement (ERR) in Ireland, introduced by the Finance Act 2022, mandates employers to report specific non-taxable payments and benefits provided to employees and directors such as Travel and Subsistence, Small Benefit Exemption, and Remote Working Daily Allowance to the Revenue Commissioners. 
  • The ERR aims to enhance transparency, compliance, and data collection for policy considerations regarding the provision of non-taxable employee benefits.
  • All employers, including charities, who provide the specified non-taxable benefits are subject to ERR, regardless of their size or industry.
  • Effective from January 1, 2024, employers must report details of travel and subsistence payments, small benefit exemptions, and remote working daily allowances on or before making the payment to employees.
  • Non-compliance with ERR can lead to penalties, with Revenue adopting a “service for compliance” approach until June 30, 2024, to support employers in their transition to the new reporting regime. 
  • Employers must report the required information to Revenue on or before the date of payment to the employee, through various mechanisms such as software integrations, bulk uploads, or online forms.
  • Employers need to review their data collection processes, engage with software providers, implement tracking processes, and educate staff to prepare for the transition to ERR.
  • Failure to comply with ERR can result in financial penalties, reputational damage, operational disruptions, and potential legal consequences.