The manual outlines the five-step decision-making framework (described by the Supreme Court) that businesses are to apply in determining whether a worker is an employee or an independent contractor for tax purposes. The manual also includes a number of examples to assist businesses in determining the employment status of workers.
Earlier this year, the Institute, under the auspices of the CCAB-I, provided detailed feedback on a draft which was shared via the TALC Direct and Capital Taxes Sub-Committee. One of our key asks was for clarity on the relative importance of the written contract between the employer and the worker. This was a key aspect of the decision in Karshan.
In its press release last week, Revenue wishes to remind businesses that they are responsible for ensuring that the correct taxes are deducted from their employees’ pay and reported through the PAYE system. It is also recommending that business take this opportunity, if they have not already done so, to review the arrangements currently in place with workers and consider those arrangements in light of the Supreme Court judgment should do so now. In this regard, we note the following passage from page 6 of the new manual:
"As outlined throughout these guidelines, there are a number of workers across a number of sectors who will need to be treated as employees for tax purposes, where previously they have been treated as self-employed. It is essential that businesses urgently and comprehensively review arrangements with all workers and determine their employment status for taxation purposes. Where a business previously treated a worker as self-employed, rather than as an employee, and the review of these arrangements by reference to the five-step framework indicates that they are employees for tax purposes, the business must now rectify that position by treating the relevant workers as employees and operating PAYE."