In October 2023 the Supreme Court delivered an important judgment on the key factors to be considered when classifying an individual’s employment status for income tax purposes.

The case was that of the Revenue Commissioners v. Karshan (Midlands) Ltd. t/a Domino’s Pizza. The case was concerned with whether the delivery drivers were independent contractors under a “contract for service” and taxable as Self-employed individuals or whether they were employees under a “contract of service”.

The Judge decided that the question of whether a contract is one “of service” or “for service” should be resolved by reference to five questions including does the contract involve an exchange of wage or remuneration for work, does the worker provider their own services or the services of others and if so does the employer exercise sufficient control over the worker to render it an employment contract.

In this case, it was concluded that the drivers were employees for the purposes of income tax.

Revenue are currently working with the Department of Social Protection and the Workplace Relations Commission to update the contents of the joint Code of Practice on Determining Employment Status and they will also be issuing new guidelines to address the implications of the case.

In the interim, if you engage the services of contractors, you should review the nature of these contracts as Revenue will be taking a much stricter view in relation to subcontractors which are not on payroll going forward.