Companies must submit a disclosure about workers who were misclassified as contractors in 2024 and 2025
Firms must submit a disclosure by Friday, January 30, and pay any tax liabilities in full, or ask for a Phased Payment Arrangement (PPA).
Those that do not address so-called ‘bogus self-employment’ by the deadline will face penalties.
The issue arises from a Supreme Court decision in 2023 in a case involving Karshan, a Domino’s Pizza franchisee, about what factors should be considered when classifying a worker’s employment status for income tax purposes.
The court ruled in favour of Revenue in deciding that delivery drivers were not independent contractors, but should be treated as employees, and taxed as such.
The ruling had implications across the workforce, where the gig economy had become prevalent. Some employees were being paid on a gross basis and told to address their own tax affairs, on the basis that they were contractors.
Revenue gave companies two years’ grace to regularise their payrolls, taking account of that Supreme Court ruling, but there is now just two weeks left to the deadline.
It announced a “disclosure opportunity” last September, recognising that some businesses were experiencing genuine difficulties in making the necessary changes to their payroll system.
It meant that firms which misclassified employees as contractors in 2024 and 2025 had a chance to disclose this, and make a settlement for income tax, PRSI and USC.
“Revenue is aware that some businesses that are reviewing the status of employees/contractors are concerned that they will not have fully completed the review by the 30 January deadline,” the tax authority said.
“We would like to clarify to those businesses who are preparing disclosures that if, after the submission deadline, there is a need to amend the details of a disclosure which has already been submitted, Revenue will accept those amendments in accordance with the Code of Practice for Revenue Compliance Interventions.”
This is provided that the original disclosure was made on a best-efforts basis, that the amendments do not arise from careless or deliberate behaviour, and are not material in nature.
The declared liability still has to be paid or a PPA requested, and Revenue says the amendment will only be allowed provided employees who work for the business are now properly classified and PAYE/PRSI is being operated through the system for 2026.
“In such cases, Revenue will continue to regard the disclosure as qualifying,” it said.
Revenue has previously warned that where an employer does not disclose liabilities before January 30, and the liabilities come to light, it will deem there has been a default, and will apply the rules relating to a failure to operate PAYE, PRSI and USC. Interest and penalties will then be applied.
The Supreme Court judgment introduced a five-step process for companies when they are deciding if a worker is an employee or a contractor for income tax purposes. A key step requires businesses to consider whether or not they exercise “sufficient control” over the person to make any agreement with them capable of being regarded as an employment agreement.??????????????
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