Revenue allows employers to reclassify workers without penalty

Revenue invites employers impacted by the Supreme Court judgment to make a disclosure in respect of 2024 and 2025.

Revenue said employers can now correct payroll tax issues for 2024 and 2045 without receiving interest or penalties in the wake of a Supreme Court judgement on the classification of employees.

They said employers who, acted in good faith relying on the case law and guidance available prior to the court judgment, but who may have misclassified employees as contractors are encouraged to take this opportunity to regularise their tax affairs.

It follows the Supreme Court judgment between the Revenue and Domino's Pizza, on whether a worker is an employee or self-employed for income tax purposes. The judgement introduced a five-step framework to be applied when determining a worker's status and has wide-reaching implications across all sectors.

Revenue said the judgment, in addition to their own guidance provides clarity on the appropriate classification of workers for income tax purposes. "However, Revenue recognises that the judgment changed the understanding of the correct legal principles and legal tests to apply in determining whether an employer had correctly classified workers as employees or as self-employed. In this context Revenue invites employers impacted by the Supreme Court judgment to make a disclosure in respect of 2024 and 2025."

The guidance is set out in Tax and Duty Manual Part, ‘Settlement arrangement arising from Revenue v Karshan (Midlands) Ltd. trading as Domino’s Pizza’. They said any necessary adjustment to income tax, USC or PRSI liabilities due in respect of 2024 and 2025 will be treated as a “technical adjustment” under the Code of Practice for Revenue Compliance Interventions.

Revenue said disclosures should be submitted no later than Friday, 30th January 2026 and all liabilities should be paid in full, via REVPAY. Employers may also request a Phased Payment Arrangement (PPA) to pay the liabilities, but any request to enter a PPA should be made at the time the disclosure is submitted.

They warned that where an employer fails to take this opportunity to review its workforce practices and make a relevant disclosure, and the liabilities from misclassification subsequently come to light, tax, interest and penalties will be applied in full.