Paul Murphy
Question:118. Deputy Paul Murphy asked the Minister for Finance if he will act to ensure that the Revenue Commissioners have the powers necessary to fully investigate potential cases of bogus self-employment. [39169/20]
View answerThursday, 26 November 2020
Questions (118)
Written answers
“Bogus self-employment” (sometimes referred to as “disguised employment”) is the description commonly given to a scenario where an individual engaged to do a job is wrongly classified as being self-employed by an employer who seeks to avoid employment related obligations. From a tax perspective, this relates to tax, USC and PRSI collected through the PAYE system. The implication for the individuals is that they do not have the benefit of certain employment related entitlements such as rates of pay, holiday pay or sick pay. In addition, as the rate of PRSI paid as a self-employed person differs from that payable by an employee, this affects an individual’s entitlements to certain social welfare benefits.
Revenue advise me that a worker’s employment status is not a matter of choice; it depends on the terms and conditions of the job. While it is usually clear whether an individual is employed or self-employed, it is not always obvious. However, case law has established tests to determine whether contracts are contracts for service (i.e. self-employed contractor) or contracts of service (i.e. employee). These tests need to be applied on a case by case basis to the fact pattern of each case.
Revenue also advise that in addition to the pure “bogus self-employment” phenomenon other service provision arrangements have emerged that are sometimes, and somewhat loosely, included within the term “bogus self-employment”. These are generally referred to as “intermediary structures” and include engagement of workers through “Personal Service Companies” (PSCs) and “Managed Service Companies” (MSCs). There are significant differences in company law treatment, social welfare treatment and tax treatment between the pure “bogus self-employment” phenomenon and the related corporate forms.
My Department, as part of a working group along with officials from the Department of Social Protection (DSP), with technical assistance from Revenue, published a report in January 2018 titled “The use of intermediary-type structures and self-employment arrangements: Implications for Social Insurance and Tax Revenues”. That report looked to identify and estimate any potential loss of tax and PRSI resulting from intermediary type structures and self-employment arrangements.
Revenue advises me that it monitors developments in labour market trends in conjunction with the DSP, with a view to seeing whether the Code of Practice and the rules around establishing employment and self-employment remain “fit for purpose” for construction and other sectors. As part of that ongoing work, Revenue are assisting DSP in developing a new Code for Determining Employment or Self-employment which is expected to be finalised early in 2021.
Finally, Revenue advise me that its compliance interventions include a focus on the practice of bogus self-employment and challenging the inappropriate classification of workers as self-employed contractors. I believe that Revenue has the powers necessary to fully investigate potential cases of bogus self-employment.
Question No. 119 answered with Question No. 86.