Written answers

Tuesday, 17 February 2015

Department of Social Protection

Tax and Social Welfare Codes

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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173. To ask the Minister for Social Protection the extra revenue that would accrue to the State if working proprietary company directors were categorised as class A for the purpose of pay related social insurance; and if she will make a statement on the matter. [6597/15]

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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174. To ask the Minister for Social Protection the amount of pay related social insurance that has been paid by employers, for proprietary company directors, in 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014 and 2015 to date. [6598/15]

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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175. To ask the Minister for Social Protection her plans on reviewing pay related social insurance payable by proprietary company directors; and if she will make a statement on the matter. [6599/15]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I propose to take Questions Nos. 173 to 175, inclusive, together.

Prior to the enactment of the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013 the practice in my Department had been that company directors holding 50% or more of the shareholding of a company were not normally regarded as being in a master/servant relationship and therefore were deemed to have a contract for services and to be insurable at class S (self-employed) and not a contract of service, insurable at class A (employee).

The rationale behind this 50% practice was that a person with such a sizeable shareholding in a company could not normally be considered an employee of that company, by virtue of the level of control he/she had over the company employing them.

Questions were raised about the correctness of this approach. It was considered that it was not desirable to reclassify approximately 90,000 directors from class S to class A as the change would impose a major additional cost on small and medium sized businesses in the depth of a recession and would be counter to Government policy.

It was decided therefore to legislate to provide for a legal basis for determining that working directors with a shareholding of 50% or greater would be insurable at Class S. Section 16 of the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013 (No. 20 of 2013)provides that the employment of a working director with a shareholding of 50% or more in a company is an excepted employment. In these circumstances the individual is classified as self-employed and is liable to pay PRSI at class S. These working directors are not regarded as being insurable as an employed contributor in the company.

This legislation came into effect from 28 June 2013.

The insurable status of working directors who own or control less than 50% of the shareholding of the company continues to be determined on a case by case basis, taking into consideration the Code of Practice for Determining the Employment or Self-employment Status of Individuals.

Annually, only about 450 (0.5%) of the total number of working directors (90,000 approximately) seek insurability decisions from my Department. The vast majority of working directors consider themselves to be class S (self-employed) rather than class A (employee).

Information on the amount of PRSI that has been paid by employers for proprietary (working) company directors in each of the past ten years is not available and it is not possible to state what extra revenue would accrue to the State if working directors were categorised as class A for PRSI purposes.

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