Liabilities for Failure to Operate the PAYE System Correctly

With effect from 1 January 2018, employers who fail to operate PAYE withholdings on employment income will be liable, on a grossed-up basis, for the PAYE liability that should have been withheld on the employment income. The provision was announced in Finance Act 2017 and it forms part of measures to facilitate the implementation of PAYE Modernisation from 1 January 2019.

Under the provision, failure to operate PAYE correctly on employment income will prove costly to employers as it will not be possible to settle the PAYE shortfall on a “gross-to-net” basis (i.e. the amount of the PAYE that should have been deducted from the employee). In addition, a provision has been included to enable Revenue to levy a penalty of €4,000 in cases where an employer fails to comply with its requirements under the PAYE system.

For now, our understanding is that Revenue will only invoke the provisions in cases where there is a persistent failure by an employer to operate the PAYE system correctly. In light of the penal nature of the provisions, it is recommended that employers review their operation of the PAYE system to identify any compliance risks.


If you have any questions in relation to the above, or if you would like to discuss this topic further, please do not hesitate to contact a member of the Mazars employment tax team below:

Frank Greene

Tax Partner

(01) 449 6415

Ken Killoran

Tax Director

(01) 449 4451

John Kelly

Tax Manager

(01) 449 4495


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In this Employment Tax Alert, we will provide you with an update on employment tax developments that impact employers, organisations in Ireland and those that do business in Ireland.

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Change In Basis Of Assessment For Employment

In line with measures introduced in Finance Act 2017, with effect from 1 January 2018, an employee will be charged to tax on employment income in the year in which the income is “paid”. Previously, an “earnings” basis applied such that employment income was taxable in the year in which it was earned, notwithstanding that it was paid and subject to PAYE withholdings in a subsequent tax year (e.g. bonus payments).



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