Revenue Tax Briefing

The content shown on this page is a Tax Briefing produced by the Irish Revenue Commissioners. To view the section of legislation to which the Tax Briefing applies, click the link below:

Revenue Tax Briefing Issue 33, September 1998

Employed or Self-Employed? - Guidelines

Introduction

The following article sets out guidelines on deciding whether an individual is to be treated as employed or self-employed for tax and social insurance purposes. The guidelines have been prepared jointly by Revenue and the Department of Social Community & Family Affairs (DSCFA).

Employed or Self-employed?

The terms “employed” and “self-employed” are not defined in law. The decision as to which category an individual falls into must be arrived at by looking at what the individual actually does, the way he/she does it and the terms and conditions under which he/she is engaged, be they by written or verbal agreement or implied. It is not simply a matter of calling a job “employment” or “self-employment”.

Consequences of status

Status as an employee or self-employed person will affect:

  • The way in which tax and PRSI is payable to the Collector-General
  • Entitlement to social welfare benefits, such as unemployment and disability benefits
  • Other rights and duties, for example, under the Employment Protection Acts such as right to holidays, maternity leave and so on
  • Liability to the public for the work done.

Guidelines

In most cases it will be clear whether an individual is employed or self-employed. However, it may not always be so obvious and in some cases it may be difficult to determine where the dividing line falls.

The Courts have laid down a number of guidelines over the years. These guidelines are mentioned below and should help in reaching a conclusion. It is important that the job as a whole is looked at including working conditions, when considering the guidelines. The same guidelines generally apply for tax and PRSI and employment protection purposes.

Guidelines on whether an individual is an employee

While all of the following factors may not apply, an individual would normally be an employee if he/she:

  • Is under the control of another person who directs as to how, when and where the work is to be carried out
  • Supplies labour only
  • Receives a fixed hourly/weekly/monthly wage
  • Cannot sub-contract the work
  • Does not supply materials for the job
  • Does not supply equipment other than the small tools of the trade
  • Is not exposed to personal financial risk in carrying out the work
  • Works set hours or a given number of hours per week or month
  • Works for one person or for one business
  • Is entitled to sick pay/holiday pay/ pension etc.
  • Receives expense payments to cover subsistence and/or travel expenses
  • Is entitled to extra pay or time off for overtime.

Some points to remember

  • An individual could have considerable freedom and independence in carrying out work and still remain an employee
  • An employee with specialist knowledge may not be directed as to how the work is carried out
  • An individual who is paid by commission, by share, or by piece work, may still be regarded as an employee
  • Some employees work for more than one employer at the same time
  • Some employees do not work on the employer’s premises
  • There are special PRSI rules for the employment of family members.

Guidelines on whether an individual is self-employed

While all of the following factors may not apply to the job, an individual would normally be self-employed if he/she:

  • Owns his/her own business
  • Is exposed to financial risk,by having to bear the cost of making good faulty or substandard work carried out under the contract
  • Has control over what is done,how it is done, when and where it is done and whether he/she does it personally
  • Is free to hire other people,on his/her terms, to do the work that is has been agreed to undertake
  • Can provide the same servicesto more than one person/business at the same time
  • Provides the materials for the job
  • Provides equipment and machinery necessary for the job, other than the small tools of the trade
  • Has a fixed place of business where materials equipment etc. can be stored
  • Costs and agree a price for the job
  • Provides his/her own insurance cover e.g. public liability etc.
  • Controls the hours ofwork in fulfilling the job obligations.

Some points to remember

  • Generally an individual should satisfy each of the self-employed guidelines above, otherwise he/she will normally be an employee
  • The fact that an individual has registered for self-assessment or VAT it does not automatically mean that he/she is self-employed
  • An office holder, such as a company director, will be taxed under the PAYE system. However, the terms and conditions will have to be examined by the Scope Section of DSCFA to decide on the appropriate PRSI Class.
  • It should be noted that a person who is a self-employed contractor in one job is not necessarily self-employed in the next job. It is also possible to be employed and self-employed at the same time in different jobs.

General

If there is still doubt as to whether a person is employed or self-employed the local tax office or Scope Section of DSCFA should be contacted for assistance. Having established all of the relevant facts, either Revenue or the DSCFA will give a written decision as to status. A decision by one Department will generally be accepted by the other, provided all relevant facts were given at the time and the circumstances remain the same. However, because of the varied nature of circumstances that arise and the different statutory provisions, such a consensus may not be possible in every case.

Appeals

Appeals against decisions made by either the Inspector of Taxes or the Scope Deciding Officer may be made, as appropriate, to either:

The Appeal Commissioners who are an independent body and hear tax appeals. Tax appeals can be initiated on foot of an assessment which issues after the tax year to which it refers. Decisions made by the Appeal Commissioners can be appealed to the courts

The Social WelfareAppeals Office who are also an independent body and deal with appeals on Social Welfare issues. Their decisions can be appealed to the High Court on a point of law.

Further information

The following information leaflets are available:

Revenue Commissioners

IT 10 Guide to the Self-AssessmentSystem for the Self-Employed

IT 11 Employee’s Guide to PAYE

IT 23 Main Features of Income Tax Self-Assessment

IT 48 Starting in Business

Copies of these leaflets are available from any tax office or from the Revenue Forms & Leaflets Service at 01 - 878 0100

Department of Social, Community and Family Affairs

SW 3 Employer’s Guide to the PRSI Contribution System

SW 63 Guide to PRSI for non-PAYEEmployees

SW 74 Guide to PRSI for the Self-Employed

Copies of these leaflets are available from the PRSI Information Section, DSCFA, at 01 - 704 3274

New Joint Leaflet

Employed or Self-Employed - A Guide for Tax and Social Insurance, available from either contact point mentioned above.