Payroll Taxes

3.1 Self-employed v Employee – Developments

In our Summer 2019 tax issue we discussed a recent determination of the Tax Appeals Commission (TAC) in relation to the age old question of whether an individual is an employee (operating under a contract of services) or is self-employed (operating under a contract for services) . The TAC considered the applicable law on this matter in a case relating to the employment status of food delivery drivers in the context of a takeaway.

The Appellant in the case argued that the drivers were carrying out their activities as self-employed individuals whilst the Revenue Commissioners argued that they were employees. After a detailed review of relevant caselaw, the TAC determined on the basis of the facts and circumstances that the drivers were employees. This included consideration of the lack of bargaining power of the drivers as they had no input in relation to the terms of their contract which was drafted by the Appellant and the drivers were not able to negotiate the rates of pay. Another test applied by the TAC, known as the enterprise test, found that the drivers did not advertise their services, they could not subcontract their work and their business did not take on credit risk or business risk.

The taxpayer (a Domino’s pizza franchise) appealed this decision to the high court. In a decision reported on December 2019, the High Court rejected the company’s appeal. The appellant had said its contract with the drivers recognises the freedom the drivers have to work when they choose. They argued the TAC was wrong to rely on an English case which found a driver’s right to cancel shifts at short notice did not relieve the driver of work-related obligations and that the TAC failed to follow Irish law in relation to “ongoing reciprocal commitment” between employer and employee to perform work.

Revenue argued the contract required the driver to initiate an agreement in relation to availability for work. It said a roster was drawn up by a store manager based on availability sheets and the Commissioner found, once a driver was rostered for one or more shifts, there was a contract "containing mutual obligations"

The High Court upheld the decision of the TAC finding that the English law on mutual obligations, did not go against Irish law but "rather recognised the necessity to adapt to modern means of engaging workers". The High Court found that the Appellant had not shown that the commissioner misapplied the law in Ireland concerning the concept of mutual obligations.

This is a very important case and it is important that taxpayers carefully review their current operating structures in light of the decision. Revenue are very keen where possible to classify individuals as employees rather than self-employed contractors. The reason is that it effectively reduces the risk of non-compliance - Revenue find it easier to collect tax from one “employer” rather than multiple individuals. In light of this “precedent” it is likely that this is an area that Revenue will pay particular attention to in future Revenue interventions.

RBK tax department can assist you with reviewing your payroll compliance, identifying risk areas, undertaking PAYE health-checks and advising you on your options to regularise any errors.

Return to "The Tax Issue - Spring 2020"

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Ronan McGivern

Taxation Partner

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