Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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235. To ask the Minister for Finance whether he will give consideration to the impact that the Revenue Commissioners’ implementation of a case (details supplied) is having on those businesses involved in the making of TV commercials that are now required to employ persons who provide services to them for no more than one day; and if he will make a statement on the matter. [41643/24]

Jim O'Callaghan (Dublin Bay South, Fianna Fail)
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236. To ask the Minister for Finance whether he will recommend to the Revenue Commissioners that the solution adopted in the UK in respect of the making of TV commercials and the use of self-employed people could be implemented in Ireland; and if he will make a statement on the matter. [41644/24]

Jack Chambers (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 235 and 236 together.

On 20 October 2023, the Supreme Court, in a unanimous decision, delivered an important judgment on the key factors to be considered when classifying an individual’s employment status for income tax purposes.

The detailed judgment was delivered by Mr. Justice Brian Murray in The Revenue Commissioners v. Karshan (Midlands) Ltd. t/a Domino’s Pizza. The case was concerned with whether delivery drivers were independent contractors under a “contract for service” and taxable under Schedule D of the Taxes Consolidation Act 1997, or employees under a “contract of service”, and taxable under Schedule E of that Act (PAYE).

The judgment provides an extensive review of relevant case law, and succinctly summarises it through the provision of a five-step decision-making framework. The decision-making framework consists of five questions that are to be used to resolve the question of whether a contract is one of service (employee) or for service (self-employed). Under the self-assessment tax system, each business making payments to individuals is obliged to correctly determine whether individuals are employed or self-employed, based on the facts and circumstances of each relationship and payment through application of the five-step framework. While the judgment related to a company engaging individuals as delivery drivers, as a decision of the Irish Supreme Court, the judgement has application across all sectors, including the production of TV commercials.

Regarding the Deputy’s suggestion that Revenue should adopt an approach similar to the UK, it is important to note that the UK has an entirely different legislative framework to that which operates in Ireland.

Furthermore, I am informed by Revenue that the Karshan judgment is the leading legally binding Irish case on the key factors to be considered when classifying an individual’s employment status for Irish income tax purposes. Revenue, in carrying out its statutory function, is obliged to apply the judgment and has no discretion whatsoever on this matter. As such, Revenue therefore cannot adopt the approach taken in the UK, as this would be contrary to Irish legislation and its interpretation as laid down by the Supreme Court judgment. I would also add that it would not be appropriate for me to make a recommendation to the Revenue Commissioners about any aspect of administering the tax system, as suggested by the Deputy, as Revenue is statutorily independent in the administration and operation of the tax code.

To assist taxpayers in understanding their tax obligations, Revenue publishes detailed guidance on many topics, on its website and in the various Tax and Duty Manuals. Revenue developed a detailed Tax and Duty Manual (TDM), to outline its position in relation to the application of the judgment and to assist businesses who engage individuals to carry out work. The TDM (Part 05-01-30) was published 21 May 2024 and is available on the Revenue website at the following link www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-30.pdf

The TDM provides general guidance and commentary but cannot cover every eventuality and circumstance. The key message in the TDM is that in determining whether an individual is self-employed or an employee, the business (entity engaging the person) must apply the five-step framework by reference to the facts and circumstances on the individual case.

The Deputy mentions that businesses involved in the making of TV commercials are now required to employ persons who provide services to them for no more than one day. The judgment outlines different types of arrangements where the engagement may result in a worker being considered as an employee for tax purposes, including confirming that a single engagement can give rise to such an outcome. However, the judgement is clear that each payment and engagement must be considered separately considering the full facts and circumstances of each engagement.

The TDM represents Revenue guidance, however I am informed by Revenue that it has not imposed any approach. Instead, it is the Supreme Court who has set down the conditions that need to be applied. It has also always been a matter for a business engaging the individual to determine whether that individual is an employee for tax purposes.

Businesses are free to disagree with elements of the TDM and self-assess based on the facts and circumstances of their own case. Revenue will then, in the normal way, look at cases based on risk and make assessments or amended assessments where appropriate and a right of appeal exists, which may lead to future litigation in this area.