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The Karshan Disclosure Opportunity
In Revenue’s recently published ebrief, Revenue is providing a significant opportunity for employers to disclose tax on any employees incorrectly treated as self-employed individuals. Preferential rates of tax are being offered to employers, with no penalty or interest applying, subject to certain circumstances being met.
This has arisen following the 2023 Supreme Court judgment in The Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza. Following that judgement a new five-step framework has been introduced to be used to determine if a worker is an employee or self-employed. This is set out in Revenue Guidance published in May 2024. This judgment has important and wide-reaching implications across all sectors.
What this could mean for your business
If any workers may have been incorrectly treated as self-employed rather than employees, your business may face exposure to underpaid PAYE, USC and PRSI.
The new one-off disclosure opportunity provides employers with a pathway to correct bona-fide classification errors for 2024 and 2025. Revenue will treat the adjustments of the tax liability as a ‘technical adjustment’ without the imposition of tax geared penalties and interest. Revenue also confirms that an income tax rate of 20% and a USC rate of 3.5% will be applied to the gross payments under these disclosures. This is particularly beneficial where the higher rate of tax is applied (up to 48%) on most disclosures to Revenue.
Acting now will provide your business certainty and comfort on the tax treatment of your workers and protect your business from future compliance challenges. It is worth noting that all disclosures under this concession must be submitted to Revenue no later than 30 January 2026.
How RSM can help
Our team can:
- Review your payroll and agreements with contractors for potential risks.
- Advise on whether your situation qualifies under the misclassification disclosure opportunity.
- Support you through the settlement process with Revenue and bringing the payroll tax liabilities to account.
Get in touch with us to discuss how these changes may affect your business.
