The tax treatment of fees for the delivery of babies of private patients by medical consultants will depend on the facts and circumstances of the case. The label given to a receipt does not determine its character nor whether it is chargeable to tax.
The Supreme Court judgement in the Karshan case (The Revenue Commissioners v. Karshan (Midlands) Ltd. t/a Domino’s Pizza) provides an extensive review of relevant caselaw and succinctly summarises it through the provision of a five-step decision-making framework. The decision-making framework consists of five questions that are to be used to resolve the question of whether a contract is one of service (employee) or for service (self-employed) for taxation purposes. Revenue developed a detailed Tax and Duty Manual (TDM) to provide guidance in relation to the application of the judgment and to assist businesses who engage individuals to carry out work. The Tax and Duty Manual is available at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-30.pdf.
Where a consultant receives a fee for a service that is provided under or in connection with a contract of service, they will be taxable as an employee under Schedule E and the employer will be required to operate the PAYE system, and to deduct income tax, Universal Social Charge, and Pay Related Social Insurance and make a return to Revenue.
Where a consultant receives a fee for the provision of a service under a contract for services, they will be subject to Income Tax under either Case II or Case IV of Schedule D. Profits arising from the carrying on of a profession are chargeable to tax under Case II, whereas profits derived from activities carried out on a once-off, casual or occasional basis such that it does not amount to the exercise of a trade/profession are chargeable to tax under Case IV. Where medical consultants have Case II or Case IV income, they are generally required to register and account for Income Tax on their taxable profits under the self-assessment system.
Chargeable persons are required to account for taxes in accordance with the law. Revenue has a comprehensive framework in place to support taxpayers to voluntarily comply with their tax obligations, as well as to challenge non-compliance.
