Our previous bulletin provides details of the Revenue guidelines on the determination of employment status of workers for income tax purposes that was published in 2024, following the Supreme Court judgement in the landmark case of The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza.
Yesterday, Revenue published a new Tax and Duty Manual (‘TDM’) providing employers who are impacted by the Supreme Court decision with an opportunity to correct any payroll tax issues in respect of 2024 and 2025, without penalty or interest, where there are bona-fide classification errors.
The Supreme Court judgement of The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza was a significant ruling relating to the employment status of workers. On foot of this judgement, Revenue issued an updated framework based on the five criteria that the Supreme Court considered essential to the determination of employment status.
In Revenue’s view, employers have “no reason” to have ongoing classification issues from 2024 onwards. However, they recognise that employers may not yet have actioned this reclassification and are inviting employers impacted by the Supreme Court ruling to make a disclosure in respect of 2024 and 2025.
Revenue will treat any adjustment of liability in respect of both years as a “technical adjustment” as provided for in the Code of Practice for Revenue Compliance Interventions. This means that Revenue will not consider liabilities to have arisen from either deliberate or careless behaviour and a tax-geared penalty will not apply to any Income Tax, USC and PRSI liabilities in respect of these years. Fixed penalties will also not apply.
In order to avail of the settlement terms outlined in the new Revenue TDM, the disclosure must be submitted to Revenue and the liabilities paid by 30 January 2026 (unless availing of a Phased Payment Arrangement). Employers will need to provide Revenue with the basis for their view that the employees are within the scope of this settlement arrangement.
The TDM advises employers availing of this settlement opportunity to notify the employees not to declare income included in this disclosure when filing their income tax returns for 2024 and 2025, to ensure that the income is not taxed twice.
Where an individual has already filed their 2024 income tax return, a “credit” will be available for tax paid through self-assessment by those employees. If there are cases where the employee filed their 2024 return and paid income tax in respect of the income subject to the disclosure, Revenue will deal with such instances on a case-by-case basis.
Where an employer does not disclose liabilities before 30 January 2026 and liabilities on this matter subsequently come to light, Revenue will form the view that the default has arisen from a complete failure to operate fiduciary taxes and will apply the relevant legislation in relation to the failure to operate Income Tax, USC, and PRSI. Interest and penalties will apply.
There are important exceptions to this disclosure opportunity. The settlement terms outlined in the TDM do not apply to the following circumstances:
Revenue’s view is that if misclassification in the above circumstances arises from either careless or deliberate behaviour, the full liability to Income Tax, USC and PRSI and interest and penalties will be pursued as provided for under the terms of all relevant legislation.
Organisations should review their contingent workforce and carefully consider whether they satisfy the terms of this disclosure opportunity. If a worker falls within the scope of this TDM a disclosure should be made before 31 January 2026. Where organisations do not avail of this opportunity, Revenue has indicated that issues identified in a future intervention will be considered a failure to operate Income Tax, USC and PRSI.
If the worker does not fall within the scope of this TDM, but should still be classified as an employee, organisations may need to consider if a wider disclosure is required.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Aoife Reid
Partner
Keith Connaughton
Partner
Clara Flynn
Director
Daire Ralph
Director
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