The tax office has released fresh instructions outlining the criteria for determining the tax status of gig economy workers. These regulations were prompted by a Supreme Court verdict in October 2023, which declared that delivery drivers for Domino’s Pizza are to be classified as employees instead of contractors for taxation reasons.
A comprehensive 58-page tax and duty handbook, circulated by the Revenue, introduces a five-step decision-making procedure that businesses must abide by. This process is designed to ascertain if a worker qualifies as an employee or a self-employed individual from a taxation perspective. This guide also includes a myriad of real-world examples and a “decision tree” to aid businesses in interpreting the implications of the Supreme Court decision on the tax liabilities of their workforce.
All businesses who utilise contractors, subcontractors or other self-employed workers have been urged by the Revenue in the past to familiarise themselves with the judgement’s details. These companies have been asked to reassess their workforce model in light of these new regulations. As a reminder issued on Wednesday clearly states, it is the businesses’ responsibility to guarantee that the correct taxes are deducted from the wages of their employees, ensuring this is reported via the PAYE system.
The landmark case which sparked this recent update from the Revenue involved Domino’s Pizza’s delivery drivers, who were contracted by Karshan (Midlands) Ltd in 2010/2011. Karshan attempted to argue that these were independent contractors operating under “contracts for service” rather than “contracts of service”. The Supreme Court, siding with the Revenue’s stance, rejected this view, asserting that these drivers should be treated as PAYE employees. However, the guidelines clarify that this case was about the right tax treatment for these drivers and not a broader discussion on employment rights.