Dáil Éireann Debate, Tuesday - 13 January 2026
812. Deputy Mairéad Farrell asked the Tánaiste and Minister for Finance if his attention has been drawn to the Karshan Disclosure Opportunity Guidance; if the Government has assessed whether this scheme complies with EU law (Art. 31 Charter, Directive 2003/88/EC). [74843/25]
Amharc ar fhreagraI thank the Deputy for her question.
At the outset, I must remind the Deputy that the principle of the independence of the Revenue Commissioners in their dealings with the tax affairs of any individuals, business or other entity under tax and customs legislation is critical to maintaining the integrity of the taxation system. Legal effect in this matter is provided under Section 101 of the Ministers and Secretaries (Amendment) Act, 2011. This provision ensures that neither article 9 of the Revenue Commissioners Order 1923 nor section 9(3) of the Ministers and Secretaries Act 1924, which relate to Ministerial responsibilities and controls, can apply to the Revenue Commissioners when performing their functions under tax and customs legislation including their handling of the Karshan Disclosure Opportunity.
However, by way of context, following the 2023 Supreme Court judgement on the Revenue Commissioners v Karshan (Midlands) Ltd T/A Domino's Pizza case, all businesses who were engaging contractors, sub-contractors or other workers on a self-employment basis were encouraged by Revenue to familiarise themselves with the detail of the judgment and review their workforce model in light of same. In May 2024, Revenue published a detailed Tax and Duty Manual (TDM) 05-01-30 ‘Revenue Guidelines for Determining Employment Status for Taxation Purposes’ which assists employers to understand their tax obligations by outlining the implications of the five-step framework, including detailed explanations of each step and examples. Prior to the publication of this Tax and Duty Manual, Revenue sought input from Government agencies and from other relevant external stakeholders, including trade union bodies, on the development of the guidelines.
Revenue recognised that prior to the judgment some employers, acting in good faith, may have misclassified employees for tax purposes as persons engaged in contracts for services.
In this context, in September 2025, Revenue announced a disclosure initiative aimed at employers who are potentially impacted by the Supreme Court judgment. This initiative incentivises such employers to make a disclosure in respect of 2024 and 2025 arising from bona-fide classification errors. Employers who acted in good faith relying on the case law and guidance available prior to the Karshan judgment, may have misclassified employees as contractors. Such employers were encouraged to review their workforce model in light of the 5-step model outlined in the Supreme Court judgement and if necessary, to regularise their tax position.
Detailed guidance on this disclosure opportunity is set out in Tax and Duty Manual ‘Settlement arrangement arising from Revenue v Karshan (Midlands) Ltd. trading as Domino’s Pizza’ which is available at: www.revenue.ie/en/tax-professionals/tdm/compliance/audit-and-other-compliance-interventions/karshan-settlement-guidance/karshan-disclosure-opportunity-guidance.pdf In the course of the design and development of this disclosure initiative, Revenue consulted via the Tax Administration Liaison Committee (TALC) Audit with the professional tax advisor, accounting and legal bodies who are members of TALC.
There are a number of exclusions from the disclosure initiative, including where Revenue is of the opinion that the misclassification has arisen from either careless or deliberate behaviour (in the context of Revenue’s Code of Practice for Revenue Compliance Interventions). In such cases the benefit of the initiative is not afforded and the full liability to Income Tax, USC and PRSI and interest and penalties will be pursued.
In addition, should an employer fail to take this opportunity to review its workforce practices and to make a disclosure to Revenue if required to do so by the deadline of 30 January 2026, Revenue may initiate an inquiry or investigation. If misclassification is subsequently identified in the course of that inquiry or investigation, Revenue will form the view that the default has arisen from a complete failure to operate fiduciary taxes and will apply the relevant legislation in relation to the failure to deduct PAYE, PRSI and USC. Interest and penalties will be applied in full in line with the relevant legislation and Revenue’s Code of Practice for Revenue Compliance Interventions which is available at: www.revenue.ie/en/tax-professionals/documents/code-of-practice-revenue-compliance-interventions.pdf
Regarding the Deputy's reference to EU law (Art. 31 Charter, Directive 2003/88/EC) - known as the Working Time Directive - it is important to note that Revenue has responsibility for employment status for taxation purposes only, but has no role in relation to workers’ entitlements. As the Deputy is aware, there are a number of other statutory bodies whose remit includes determining the employment status of a person. The Department of Social Protection (DSP) determines employment status with a view to deciding the appropriate class of PRSI for an individual. Responsibility for a range of employment rights, such as employment equality, minimum wage rates, holiday pay, sick pay, maternal and paternal leave, sectoral pay agreements, etc., falls to the Workplace Relations Commission (WRC) under the aegis of the Department of Enterprise, Trade and Employment. The WRC’s Adjudication Service determine employment status as a preliminary issue when adjudicating on employment rights complaints.
Each of these bodies make their determinations independently of each other in respect of the particular functions for which they are responsible, based on the separate legislative frameworks that apply. As such, it should be noted that a decision by one body is non-binding on the other two bodies. The responsibilities of each body in relation to employment status are outlined in the updated Code of Practice on Determining Employment Status (“the Joint Code”), which was jointly published in November 2024 by DSP, the WRC and Revenue. The Joint Code is available at: assets.gov.ie/static/documents/code-of-practice-on-determining-employment-status-cb301d37-93cb-4fbf-b45c-6997ed370f04.pdf
I note the Deputy refers particularly to Article 31 of the Working Time Directive (Directive 2003/88/EC). I understand that this Directive lays down minimum safety and health requirements for the organisation of working time. The competent authority for this and other workers’ rights under EU legislative instruments is the Department of Enterprise Trade and Employment. As outlined above, my Department and Revenue have no role in relation to worker’s rights and the Karshan Disclosure opportunity has no bearing on such rights or entitlements.
