Employment Law
This Alert highlights the tax implications stemming from the recent Judgment and Revenue's Tax and Duty Manual (TDM). However, the employment law considerations must not be overlooked.
Given the current developments, including the notable UK decision regarding Uber drivers, Deirdre Malone and her legal team in our EY Law practice are supporting our clients with employment law matters. As the workforce landscape evolves, the legal implications of contractor arrangements including the impact on entitlement to pensions, holiday pay, sick pay etc. should be taken into account to ensure an organisation has a thorough integrated tax and legal understanding of the issues before making any commercial decisions in relation to existing or future engagements.
Revenue’s interactions and updates to Revenue audit questionnaire
Not surprisingly Revenue are reflecting their focus on Contractors in current PAYE audits and have included new requests in their questionnaires, including;
- Are there any Consultants who were previous employees or directors of the Company?
- Are there any Contractors who were previous employees or directors of the Company?
- Provide an overview of steps taken to ensure that contractors/consultants are bona fide and are not in fact employees in the light of the Supreme court decision in the Karshan case
In addition, we understand that Revenue have contacted a number of organisations including State bodies to ‘nudge’ a self-review of contractor relationships.
Personal Service Companies
Contractors typically provide their services as an individual or through a Personal Service Company (‘PSC’). A PSC is where a contractor provides their services through a limited company and where this is the arrangement the PSC should be considered a separate legal entity. Where the PSC is an Irish incorporated and tax resident company, the corporate veil (unless pierced/lifted) should ensure that the TDM should not apply to such PSC engagements.
EY View
The judgement and the TDM does not fundamentally change our approach insofar as each review of employment status must be considered on its own merits and facts by applying the Tests laid down under case law.
The judgement does however give Revenue greater scope to challenge long standing arrangements and norms in certain industries like IT, Construction, Media and Financial Services and as a result they have issued this TDM. The TDM reviews these Tests in the context of more real-world work arrangements and separately provides a list of factual matters to be considered in determining whether a contract of employment or an independent contractor arrangement exists. Both the judgement and TDM are helpful as they focus on the five tests and the factual matters that should be considered to determine whether a contract of employment exists.
What to do next?
We are assisting our clients with both tax and legal reviews as they proactively check their current engagements.
You may wish to review your contractor arrangements in line with Revenue updated guidance to consider taxation, employment law and pension implications for risk cases, in particular;
- Ensure you have a written contract in place for each contractor arrangement
- Review contractor agreements with individuals under the five-step framework
- Review contractor agreements with PSCs to ensure the veil of incorporation remains intact - the privilege of incorporation can only be availed of if the operational actions align to the contractual arrangements with the PSC i.e. invoicing, payment arrangements etc are aligned to the PSC.
For further assistance, please contact your usual EY representative or one of the EY contacts on this alert.
Contacts
If you require further information, please call your regular contact in EY or contact any of the following:
Michael Rooney
Partner
T: + 353 1 221 2857 | E: michael.rooney@ie.ey.com
Marie Caulfield
Partner
T: + 353 1 221 1416 | E: marie.caulfield@ie.ey.com
Rachel Dillon
Partner
T: + 353 1 221 2554 | E: rachel.dillon@ie.ey.com
Colin Spence
Director
T: + 353 1 221 1240 | E: colin.spence@ie.ey.com
Jennifer Sweeney
Director
T: + 353 1 479 4007 | E: jennifer.sweeney1@ie.ey.com
Caoimhe Neary
Director
T: + 353 1 478 6579 | E: caoimhe.neary@ie.ey.com
Elaine O’Gara
Director
T: + 353 087 490 2947 | E: elaine.o.gara@ie.ey.com
Jake Higgitt
Director
T: + 353 21 480 2877 | E: jake.higgitt@ie.ey.com
Waterford
Gillian Moore
Director
T: + 353 1 479 2216 | E: gillian.m.moore@ie.ey.com
Louise Cadogan
Director
T: + 353 5 184 0358 | E: louise.cadogan@ie.ey.com
Cork
Peter O’Connor
Director
T: + 353 2 148 02843 | E: peter.oconnor@ie.ey.com
EY Law
Deirdre Malone
Partner
T: +353 21 480 5729 | E: deirdre.malone@ie.ey.com