On 20th October 2023, the Supreme Court delivered its unanimous decision in The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza [2023] IESC 24 (the “Karshan Case.” It was held that delivery drivers of Domino’s Pizza should be treated as employees and not independent contractors. Today Revenue published their “Guidelines for Determining Employment Status for Taxation purposes” which outlines a five step decision making framework to determine the employment status of individuals for tax purposes: eBrief No. 140/24
According to Revenue:
“Where an individual is engaged under a contract of service, i.e., as an employee taxable under Schedule E, income tax, USC and PRSI should be deducted from his or her employment income through their employer’s payroll system on or before when a payment is made.
Where an individual is engaged under a contract for service, i.e., as a self-employed individual taxable under Schedule D, he or she will generally be obliged to register for self-assessment, to pay preliminary tax and file their own income tax returns using the Revenue Online Service (ROS).”
The guidance material asks the following questions:
In other words, there must be an exchange of work for wage/remuneration before a working relationship can be categorised as a “contract for service.”
A contract is considered to be an engagement where there is a payment by the business to the individual regardless of whether or not there is a written contract in place.
This test distinguishes between a situation where a worker provides services to a business personally versus where it’s possible for that worker to engage others to provide the services on his/her/their behalf.
The court judgment placed a strong emphasis on the degree of freedom the individual has to decide how the work is carried out.
It is essential to establish the level of control the business has over the individual worker. For example, can it decide what the particular duties are, as well as how, when and where the work should be carried out?
Is the worker carrying on the business of the organisation he/she/they work(s) for or is this individual working on their own account?
In other words, to what degree is the worker/individual integrated into the business?
Apart from reviewing any written agreement in place, it is vital that the facts of the working arrangement are examined to establish if the individual is working for the business or is providing services on his/her/their own account.
If the answer to any of the first three questions set out above are “No”, a contract of employment is not deemed to exist and the individual should not be treated as an employee.
If, however, the answer to the first three questions is “Yes”, then questions 4 and 5 of the framework must be considered to determine if a contract of employment exists.
The Guidelines also include nineteen practical examples which demonstrate the application of the five step framework to assist in determining how workers, in a number of different situations, will be taxed.
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.