Triona Cody

The Revenue Commissioners has published guidelines for a settlement arrangement following the October 2023 Supreme Court judgment delivered in The Revenue Commissioners v Karshan (Midlands) Ltd T/A Domino’s Pizza.

These guidelines provide employers with a disclosure opportunity to regularise any misclassification of employees as contractors.

Determining employment status

The Supreme Court judgment set out five questions to establish whether a contract is one of service (employee) or for service (self-employed).

Employers are responsible for ensuring the correct tax deductions from their employees’ pay and reporting through the PAYE system.

In May 2024, the Office of the Revenue Commissioners published guidelines for determining employment status for taxation purposes in response to the Supreme Court judgment.

These guidelines encouraged businesses to urgently and comprehensively review arrangements with all workers and determine their employment status for taxation purposes.

Disclosure opportunity

Revenue’s position is that employers should not have ongoing classification issues for 2024 or subsequent years.

Employers who, acting in good faith, misclassified an individual’s employment status have until 30 January 2026 to correct payroll tax issues for 2024 and 2025 without penalty or interest.

If liabilities are settled by way of a phased payment arrangement, interest will apply over the repayment period.

The guidelines specify that these settlement terms do not apply to:

• any intervention which was open to employers prior to the Supreme Court judgment;
• individuals who, under the Code of Practice on Determining Employment Status in effect prior to October 2023, should have been classified as an employee; or
• individuals who should have been classified as employees based on published decisions or determinations of the Department of Social Protection, the Workplace Relations Commission, the Tax Appeals Commission, or a court.

If Revenue determines that misclassification resulted from careless or deliberate behaviour by employers, full liability to Income Tax, USC, and PRSI, as well as interest and penalties, will be pursued under relevant legislation.

Employers who do not use this disclosure opportunity before 30 January 2026 and whose liabilities are later discovered will be liable for their failure to operate PAYE, PRSI, and USC, and interest and penalties will apply.

Conclusion

Employers are required to classify workers in accordance with the criteria set out in the Supreme Court judgment.

The guidelines provide a disclosure opportunity for employers to regularise any bona fide misclassification of employees as contractors for the years 2024 and 2025.

This opportunity is available without penalty or interest until 30 January 2026.

• Triona Cody is a partner in Kane Tuohy’s employment and litigation department. Kate Farrelly assisted in the writing of this article.