Here in my Cork city hinterland, it’s beginning to feel like boom times again. There’s full blown construction at a number of local residential sites.
The effects are widespread from deli counters hogged by high-viz wearing, steel-toe-capped tradesmen, to increased ‘white van’ traffic, and the return of tractors and dump trailers laden with spoil.
The pick-up in building in generally good for farmers, with many of them partaking in construction work directly, or providing services.
Since the last building boom ended, the world of tax has become far more sophisticated, and those intending to partake in the new building boom should inform themselves of the many changes by Revenue.
From a farmer’s or agri-contractor’s perspective, perhaps the biggest change is seen if hiring in labour without properly registering and accounting for wage taxes on that labour. (They must also beware of the “principal contractor” regime, I will cover it here in coming weeks).
First, hiring labour without formally putting such employees ‘through the books’ poses a most serious tax risk to your business. Often, the question arises: Do I really need to register an employee who is only going to work for me one or two days?
The answer, unfortunately, is yes. Failure to register an employee can carry a penalty of up to €3,000.
Failure to obtain an employee’s PPS number and operate emergency tax can leave an employer who already paid an employee €100 into the hand, for example, footed with a bill by Revenue of a further €130 to cover the taxes on that €100!
Don’t assume Revenue have a
threshold below which they overlook casual labour. As a rule of thumb, if you have an employee, you must register him/her with Revenue.
Something relatively new is that the registration process has been withdrawn from the employer. Instead, in almost all cases, the employee must register for “MyAccount” on Revenue’s website, and set up their employment online.
A new rule of thumb could be adopted by employers: if you’re not registered, you’re not getting paid. By adopting this hard line, an employer can avoid the emergency tax system, and adhere to the registration requirements.
In relation to who constitutes an employee, a whole raft of legal cases have defined the parameters.
The following summarises some of the main criteria, is the person:
n paid by the hour (or piecemeal such as by the load/day)?
n under the direction and control of the employer, to what degree has the person their own autonomy?
n entitled to holiday pay/sick leave/public holidays?
n working set hours determined by the employer?
n bearing financial risk (will they receive payment regardless of the outcome of their work?)
n have their own insurance?
n use their own tools, or supplying labour only?
n commonly known as an employee of the company (using a personalised email in the employer’s email domain)?
n entitled to arrange an alternative worker?
n working only for one or mainly for one customer?
Of critical importance is that contracts, or worse still, word of mouth agreements, suggesting a person is to ‘look after their own taxes’ do not in any way support a case that the payee is a self-employed contractor.
Similarly, the individual being registered for income tax already, has virtually no bearing on whether he/she is an employee.
Code of Practice for Determining Employment or Self-Employment Status of Individuals
is on the Revenue website.
Paying an employee carries a tax cost. Employer’s PRSI adds 8.5-10.75% to the wage bill, and employees (seemingly more so in the building sector) look for a set amount paid into the hand, which puts the tax burden on the employer. But registering an employee properly can work out a lot cheaper than retrospective emergency tax, interest and penalties.
Determining if someone is your employee or not has major ramifications outside of tax — from perspectives of health and safety in the work place, insurance (employers liability), terms and conditions (holiday pay, Organisation of Working Time Act, minimum wage, etc.