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Treasury publishes guidance on how ‘collaborative economy’ workers should be taxed

The move follows a Supreme Court ruling last year that classified Domino’s Pizza delivery drivers as employees.

The case, which concerned 2010 and 2011, centered on whether the drivers were employees for tax purposes. Karshan (Midlands) Ltd, trading as Domino’s Pizza, had argued that they were independent contractors under “service contracts”.

The ruling arose from an appeal by the Revenue Commissioners over a €215,718 tax bill they said Karshan owed to drivers who worked in 2010 and 2011.

In a unanimous decision last October, the seven-judge Supreme Court ruled in favor of Revenue and held that the drivers were employees of a franchise rather than independent contractors.

The Department of Taxation has published a tax and duty manual which presents a five-step decision-making framework that businesses should use to determine whether a worker is an employee or self-employed for tax purposes.

The framework consists of five questions, including whether they are subject to “sufficient control” by the employer “for the agreement to be capable of being an employment agreement.”

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It asks employers to consider whether the agreement aims at the “putative employee working for himself or herself or for the putative employer.”

It also includes some practical examples to help companies that hire ad hoc workers determine what the Supreme Court’s decision means for this group.

In a statement, the Treasury encouraged all companies that hire contractors, subcontractors or other self-employed workers to familiarize themselves with the Supreme Court ruling. He said businesses must ensure the correct taxes are deducted from wages and reported through the PAYE system.

Moira Grassick, operations director at employment law consultancy Peninsula Ireland, said the Employment Relations Commission could also review the Supreme Court ruling and “could make some changes to its own codes, but we have not yet heard any clarification from the regard. “

“This is not a new area,” he noted. “It’s one of those positions that’s been a little vague for a number of years.”

Grassick urged employers to consider the new earnings framework to see which category a worker falls into. This also includes consideration of issues such as substitute workers.

“If I am a contractor, will the company I have a contract with only expect from me? Can I send someone else to replace him? That’s a really big test,” he said.

Other areas to consider include how payment is made to the worker in question. “Is that a salary they are actually giving you, rather than some kind of compensation package?”

While ‘gig economy’ workers have been the focus of attention after the recent case, other sectors must also consider whether the people who work for them are employees or contractors, he said.

“We would see a lot of contractors in the IT industry, for example, and in development,” Ms Grassick said. “That ruling could have a big impact on employers in different industries across the board, so it’s something people need to be careful about and make sure they’re paying attention to what the guidance says about it.”

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