Guidelines for Determining Employment Status for Taxation Purposes

The Supreme Court judgement set out five questions that should be answered to establish whether a contract is one of service (employee) or for service (self-employed):

1.     Does the contract involve the exchange of wage or other remuneration for work?

 

2.     If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?

 

3.     If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?

 

4.     If these three requirements are met, the decision maker must then determine whether the terms of the contract between the employer and worker is consistent with an employment contract or some other type of contract and consider whether the evidence points to the putative employee working for themselves or for the employer.

 

5.     It should be determined if there is any particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.

 

The Guidelines encourage businesses to urgently and comprehensively review arrangements with all workers and determine their employment status for taxation purposes. It is expected that there will be an increase in the number of workers that will be determined to be employees for tax purposes when the five questions above are applied to their facts and circumstances. For those re-classified as employees for tax purposes, businesses will have an obligation to operate PAYE. There is no change in the tax position for businesses who engage companies to carry out work on their behalf.

The Guidelines include helpful case-study examples, and specific commentary for the following sectors:

a)    construction;

b)    part-time, casual and seasonal workers;

c)     workers engaged in a domestic setting;

d)    couriers and other transport providers;

e)    media;

f)      public sector; and

g)    platform operators.

In addition to these welcome Guidelines, we understand Revenue is working with the Department of Social Protection and the Workplace Relations Commission to update the Code of Practice on Determining Employment Status. This will provide businesses with a clear understanding of employment status, taking into account labour market practices and developments in legislation and caselaw.

For further information on this topic, please contact Cómhnall Tuohy or any member of the Employment Team.

This document has been prepared by Kane Tuohy LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.