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Payments to employees

  1. Overview
  2. Directors
  3. Holiday pay and advance payments
  4. Benefit in Kind (BIK)
  5. Shadow payroll

Directors

The Pay As You Earn (PAYE) system applies to both proprietary and non-proprietary directors as it does to any other employee.

You must request a Revenue Payroll Notification (RPN) and apply the details returned to the pay of the director. Any payments paid to directors must be reported to Revenue on or before the pay date. 

Proprietary Directors are still required to complete a Form 11. Income received by a proprietary director in respect of that directorship is assessable on an earnings basis. This means the income is taxed in the period in which it is earned. Income received by a non-proprietary director is assessable on a receipts basis. This means the income is taxed in the period in which it is received.

Proprietary directors 

Proprietary directors are subject to self-assessment regardless of whether they have other income or not. Where a director’s salary is voted, you must operate PAYE on the date the payment is made. 

Emoluments might be paid more than six months after the end of the accounting year. These are deemed to have been paid on the last day of the previous year.

You must make an amendment to the payroll submission for that period and resubmit to Revenue.

  • Example 1

    Accounting period: 1 January 2022 – 31 December 2022

    A fee of €10,000 is declared and paid to the director in March 2023. A payroll submission is filed in March 2023. This includes the details of the director’s salary and emoluments for that period, including the €10,000. The payment date that is reported on the submission is the date the payment was made to the director. 

    The PAYE system calculates tax due on the payments received by a director or employee in a year of assessment. Proprietary directors, however, are assessed to Income Tax in respect of the amount actually earned in a year of assessment.

    The €10,000 must be declared by the proprietary director in the 2022 Income Tax Return in the year it was earned. 

  • Example 2

    The same payment is made to the proprietary director in July 2023.

    This payment has been made more than six months after the end of the accounting year. Therefore, the payment is deemed to be paid on 31 December 2022. The payroll submission for December 2020 must be amended to include the €10,000. 

    The proprietary director should also include the €10,000 on the 2022 Income Tax Return.

Next: Holiday pay and advance payments

Published: 22 November 2023 Print this page

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