Vol. 486 No. 1
106 Mr. Higgins (Dublin West) asked the Minister for Finance if his attention has been drawn to the fact that the C2 or C45 system are being widely abused in the building industry; and if he will make a statement on the matter. [1951/98]
I am informed by the Revenue Commissioners that persons employed in the construction industry are classified for tax purposes as employees or as sub-contractors. I am assuming that the abuse referred to by the Deputy relates to the practice of building workers being incorrectly categorised as self-employed (sub-contractors) when they are in fact employees.
Sub-contracting is an integral part of the construction industry. Payments to sub-contractors come within the relevant contracts system — commonly referred to as the C2 or C45 system. Under this system, where a principal contractor makes a payment to an unregistered contractor, he or she is required to deduct relevant contracts tax from those payments at the rate of 35 per cent.
Revenue has issued guidelines to the industry setting out the criteria under which a person may be regarded as an employee as distinct from a sub-contractor. Principal contractors and sub-contractors creating self-employment contractual arrangements must sign a declaration to the effect that these guidelines have been considered by them and they are both satisfied that the contract created is a contract of self-employment.
Revenue have advised me that they are currently engaged in a nationwide campaign to ensure that declarations made by principal contractors and sub-contractors represent the true situation. Where an employment is considered to exist and PAYE/PRSI and levies are not being deducted, the principal is being advised to put matters on a proper footing. Where this is not done, the principal will become liable for the PAYE/PRSI and levies. Each principal classified by Revenue as an employer can have that decision reviewed internally in Revenue and has a statutory right of appeal to the appeal commissioners.
