Mr. Niall Cody:

The Senator covered a lot. On classification of employment, the Supreme Court decision in October 2023 was about the tax treatment of drivers for Karshan (Midlands) Limited. The Supreme Court decision was about the employment status for tax purposes. Despite what many people seem to think, Revenue took the case to determine that the drivers were employees. We were successful at the Tax Appeals Commission and at the High Court. We lost the case in the Court of Appeal. The Supreme Court was the final arbiter and came up with its judgment in a complicated area. It was a really useful judgment in which the court was clear that what it was considering was people's employment status for tax purposes. It said that issues relating to employment rights have other legislation as well. It provides a really important five-step framework to determine whether a worker is an employee or self-employed, and whether it is contract of service or contract for service.

After the Supreme Court decision was given, we issued a notice to employers to have regard to the judgment and to review the employment of workers, subcontractors, contractors or employees, having regard to the judgment. There is no doubt that the judgment did not change the law, because the judgment can never change the law, but it definitely changed the understanding across a range of sectors. We now have a process of finalising our detailed guidance giving effect to the judgment. We are often accused of having guidance that is too comprehensive and that will happen with our guidance on contracts of and contracts for services, at 40-odd pages. It has gone to the various interest groups. It has not been welcomed by everybody, but we are used to that. I bring the judgment in Karshan with me because it shows the complexity of the area.

It is 190 pages. The Court of Appeal judgment is about as big again and has contradictory views and contradictory decisions. We will finalise our tax and duty manual, as we call it, this month and issue it. We are currently engaging with some of the entities and companies that have sub-contractors and we are looking at the classification to see what the situation is. I believe that this is not the end of court judicial review of the areas. It is a really interesting judgment. It provides a welcome framework for us to do our work but we know from engagement with companies and advisers that they do not all share our views. In addition, we are only one of three State agencies involved in the area. The Department of Social Protection, as I said in my opening statement, is involved for social welfare purposes. The Workplace Relations Commission, WRC, is involved with regard to employment rights. It is very interesting that if we look at the WRC website we can see that the WRC is paying close attention to the court decision in the Karshan case and is applying the five-step framework to give its views.

It is a challenging area. We have always engaged in classification but I believe this changes the scale and scope. One of the big changes is that it recognised the idea that a person could be an employee to do one job and that there was not a continuity of service involved. That is probably a change in the understanding around when a person is employed or self-employed. I believe there will be a significant work programme over the next couple of years on this area. I have been at this committee before and I have been at other committees talking about this area.

The Department of Social Protection, the WRC and Revenue are also looking at the code of practice for classification. On a personal level - I rarely give a personal view on some of the issues - I am a little ambivalent about the code of practice. I believe that on occasion codes of practice provide the framework to construct an arrangement to prevent. It provides a template for one to draw up a contract that meets the terms in legalistic fashion but which may not fully reflect the factual arrangements. One of the really interesting parts of the judgment was the idea that although contracts are really important, they cannot override the actual factual representation. This is not easy, however. It is not black and white. I remember appearing before another committee where I was told by a member that this is very easy to sort out in the context of the construction sector but not for small builders. It is really complex and complicated.

We are engaging with entities and companies. We are looking at the sectors. The sectors are obvious. Traditionally, construction is probably where the whole industry started with subcontracting. The building contracts tax was introduced in 1970 to address subcontractors who were not employees. It did not make an employee a subcontractor but it tried to secure the tax liability on what was a mobile force. When we launched our annual report, we said that one of the areas we are looking at is whether the scope of relevant contracts tax should be broadened to address circumstances where somebody is subcontracting and not an employee.

On the Senator's question about PhD students, I have paid attention to the debates around the PhD issue. Essentially there is a non-taxable payment in the third level sector which is not actually driven by the tax arrangements. It was specifically provided. I saw it mentioned in the letter to us. I have read all the material and it really is a matter primarily for the Department of Further and Higher Education, Research, Innovation and Science, and probably the Department of Social Protection. If the PhD students are not covered by the specific exemption, they are taxable. In some cases third level students are supported by a firm, profession or job. The students get their or her wages and that is taxable. From the material I have read that has been prepared by the representatives of the PhD students in this area of the third level sector, the PhD students are saying they should get a kind of a decent wage or an appropriate wage. Certainly in that context they should come within the PAYE system like everybody else. There is specific legislation, however, which is not primarily tax legislation, that provides for it.