Revenue Issues New Guidance On Determining Employment Status For Tax Purposes

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For taxation purposes, there is a difference in treatment between employees and self-employed persons engaged as independent contractors. In October 2023...
Ireland Employment and HR
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The recently published Revenue Guidelines for Determining Employment Status for Taxation Purposes provide useful guidance as to the implications of the significant Supreme Court decision in the Domino's Pizza case.


For taxation purposes, there is a difference in treatment between employees and self-employed persons engaged as independent contractors. In October 2023, the Supreme Court delivered a significant judgment in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino's Pizza [2023] IESC 24 (the "Domino's Judgment") in which it examined this distinction in detail and, ultimately, reformulated and restated the law in this area in Ireland. Overturning the decision of the Court of Appeal, the Supreme Court held that the delivery drivers were properly categorised by Revenue as employees and not as independent contractors. For a detailed analysis of the case, see our briefing here.

The Guidelines

The Revenue Guidelines for Determining Employment Status for Taxation Purposes, contained in the Tax and Duty Manual, were issued to provide guidance on the tax implications of the Domino's Judgment. The Guidelines set out the key elements of the decision and the effect it will have on employers, which is illustrated through an exploration of several practical examples.

Five-step decision-making framework

The Guidelines describe the applicable decision-making framework as consisting of five questions which can be summarised as relating to:

  1. The work/wage bargain
  2. Personal service
  3. Control
  4. All the circumstances of the employment
  5. The legislative context

According to the Guidelines, the first three questions should be viewed as a "filter", meaning that all three must be answered affirmatively if the possibility of an employment contract is to exist. If this requirement is satisfied, questions four and five will be considered to determine if an employment contract exists in the circumstances.

The first question asks whether the contract involves the exchange of wages or other remuneration for work, which is necessary if a working arrangement is to be categorised as an employment contract. Arrangements which lack consideration or which are truly casual or domestic in nature will not meet this requirement. However, the Guidelines note that there need not necessarily be continuity of obligation – in other words, an individual "can be considered an employee in respect of one 'job'".

The second question considers whether the worker has agreed to provide their services to the employer personally. This is known as the "substitution test" as it concerns the worker's right to subcontract or appoint a third party to carry out all or part of the work. The more restrictions imposed on a worker's freedom to appoint a substitute, the more likely it is that the arrangement is that of an employment contract.

The third question considers "the ability, authority, or right of a business to exercise control over a worker" regarding the nature of their work and the manner in which it is conducted. The Guidelines explain that this part of the test is a "gateway" which considers the minimum level of control necessary for a relationship to be an employment contract, which will differ according to the nature of the employment. Matters to be considered include the "enterprise test" (which examines where the economic risk lies as between the parties to the arrangement), the question of integration, notice periods, and control over payment and working hours. Finally, the Guidelines emphasise that it is the right of the employer to exercise control which is relevant, rather than whether they actually exercise that right in practice.

The fourth question, namely all the circumstances of the employment, is a broad one which the Guidelines describe as an examination of "the entire factual matrix of the engagement". Factors to be considered include the factual matrix in which the contract was concluded and the actual dealings between the parties. The Guidelines also note that this part of the inquiry is free standing (in other words, it does not depend on the findings made in the other parts) and that, if the finding is that the contract is not one of employment, the matter should be resolved by identifying what it actually is.

The fifth and final question looks to the legislative context, and involves a consideration of whether any legislation requires "an adjustment or supplement to any of the foregoing questions in the particular circumstances". In other words, the Guidelines affirm that certain legislative schemes might require modification of the test or, indeed, the approach taken to the relationship between the written contract and the parties' dealings in practice.

Practical commentary and examples

The Guidelines contain commentary on workers engaged in particular sectors, such as workers engaged in the construction, telecommunications, information technology, healthcare, courier, and entertainment industries – as well as part-time, casual, or seasonal and public sector workers and platform workers.

The Guidelines also provide commentary on the provision of workers through a company and through an employment agency. It confirms the existing view that an engagement of companies by businesses cannot constitute contracts of service, or employments, for taxation purposes, however, notes that the status of those workers contracting with the company should be analysed.

In addition to the commentary, several practical examples designed to assist businesses by illustrating the manner in which the Domino's Judgment may be applied to certain working arrangements are included.


From the perspective of businesses, Revenue's interpretation of the Domino's Judgment as contained in the Guidelines provides welcome clarity on the determination of the employment status of workers for taxation purposes. Revenue is encouraging all businesses that are engaging contractors, sub-contractors, or other workers on a self-employed basis to familiarise themselves with these Guidelines. Such businesses should conduct a comprehensive review of arrangements with all workers in light of this new guidance in order to ensure that they are being treated in accordance with the law as it stands today.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

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