Businesses face payroll tax liabilities deadline
Businesses are being warned to urgently check if they are exposed to payroll tax liabilities before the Revenue disclosure deadline closes at the end of the month.
The advice was issued by business advisory firm Azets Ireland, which said the deadline for worker misclassification closes on Friday, 30th January.
The increasing use of contractors and gig workers across all businesses means SMEs are often navigating complex and evolving payroll compliance requirements.
The issue follows the 2023 Supreme Court ruling in the Karshan (Domino’s Pizza) case, which clarified the tests for determining employment status for tax purposes.
While Revenue provided a two-year window for businesses to regularise their payroll arrangements, Azets says many organisations may still be exposed, particularly in sectors that rely heavily on contractor models.
Businesses that misclassified workers during 2024 and 2025 must submit a disclosure to Revenue by January 30 and either pay any outstanding liabilities in full or apply for a Phased Payment Arrangement (PPA).
Failure to do so could result in interest and penalties.
Revenue will allow payroll obligations for 2024 and 2025 to be settled on the following basis by 30 January 2026:
Income Tax: 20% of gross payments
USC: 3.5% of gross payments
PRSI: Employee and Employer PRSI at normal rates
Submitting a disclosure by the end of January allows businesses to settle payroll obligations without the need to re-gross payments, avoiding higher tax liabilities.
If Revenue accepts the disclosure, no penalties will apply, and interest will only be charged where the tax is paid in instalments, helping to minimise the immediate financial impact for businesses.
Revenue has stated that where worker misclassification is identified in the future, it may be treated as a failure to operate PAYE, which could result in re-grossing of payments to calculate tax liabilities, significantly increasing overall costs, and the application of interest and penalties.
Catherine McGovern, Tax Partner at Azets Ireland, said: “The scale of this issue should not be underestimated. Across sectors such as the gig economy, IT, construction, professional services and the performing arts, thousands of workers may be affected, while many businesses may be exposed to payroll tax liabilities arising from worker misclassification.
Catherine McGovern, Tax Partner at Azets Ireland
“With just days remaining until the 30th January deadline, businesses need to act immediately. Any business that engages individuals as contractors should now be reviewing those arrangements with the tests determined in the Karshan case and seeking professional advice.
“Preparing a disclosure can take significant time, and delay risks losing the benefit of the disclosure opportunity and facing significant tax and PRSI liabilities, together with interest and penalties.”
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