Employing staff for the first time, what are your tax obligations?

Here we take a look at what you need to know when employing staff for the first time, the common pitfalls, tax saving tips and Government schemes available.

After you take on a new employee, you must first ensure that you are registered for Employers PRSI with the Revenue Commissioners. It is now quick and easy to register online via the Revenue Online Service (ROS).

When you take on that first employee it is important to get their P45 from their previous employer and then register them as your employee online. Once you have done this, Revenue will make available to you the employees tax credit, bands and USC rates through ROS.

All modern payroll systems will allow you to connect directly with ROS and import the employee’s relevant information. It’s important this is done correctly from the beginning to ensure both you are your staff are paying the correct tax.

You will be obliged to return to Revenue the payroll taxes deducted from each employee online via a P30 return. These returns are periodic in nature and are due for filing and payment by the 23^rd of the following month (i.e. your January 2015 P30 will be due for filing and payment by 23 February 2015).

You will also be obliged to file a year end P35 return with Revenue. This form gives details of all tax deducted from your employees during the year. Specifically it details all Income Tax, Employers and Employees PRSI and the Universal Social Charge.

Late filing and payment of P30 and P35 returns may attract penalties and interest from Revenue, so it is crucial they are paid on time.

Tax Saving tips

If your employee travels to work by bike, you can purchase the bike on their behalf and deduct this from their payroll. The employee’s taxable salary is reduced by the cost of the bike and potentially saves them up to 51% (For an employee earning under €70,044). The amount of Employers PRSI paid by you will also be reduced.

If you would like some assistance in handling your payroll set up. please feel free to get in touch with your local TaxAssist Accountant who would be happy to help.

Date published 20 Feb 2015

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.