Revenue provides disclosure opportunity to regularise misclassification of self-employment for 2024 and 2025

New settlement arrangement for 2024 and 2025

Revenue recently announced that employers can avail of the opportunity to correct payroll tax issues for 2024 and 2025 (only) arising from bona fide employment status classification errors that they made, and Revenue will not impose any interest and penalty. Also, Revenue will not seek a “gross-up” of the amounts paid to individuals incorrectly treated as contractors in the above years.

It is worth explaining what has led Revenue to provide this new settlement arrangement opportunity to employers.

In October 2023, the Supreme Court judgment in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza introduced a five-step framework to be applied when determining if a worker is an employee or self-employed for tax purposes.

In May 2024, Revenue published detailed guidance explaining each of the steps involved in the decision-making framework and setting out a number of practical examples to assist businesses in determining the taxation of workers they engage. At that time, Revenue encouraged all businesses that were engaging contractors or other workers on a self-employed basis to familiarise themselves with the details of the judgment and review their workforce model in this regard.

However, Revenue recognises that the judgment changed the understanding of the correct legal principles and legal tests to apply in determining whether an employer had correctly classified workers as employees or as self-employed. As a result, Revenue decided to invite employers impacted by the Supreme Court judgment to make a disclosure in respect of 2024 and 2025.

On 11 September 2025, Revenue published guidance to assist employers in calculating any adjustment needed in relation to 2024 and 2025. Any necessary adjustment to PAYE, USC, or PRSI liabilities due in respect of 2024 and 2025 will be treated as a “technical adjustment” under the Code of Practice for Revenue Compliance Interventions.

Revenue encourages employers who acted in good faith, relying on the case law and guidance available prior to the Supreme Court judgment in the Domino’s Pizza case, but who may have misclassified employees as contractors, to take this opportunity to regularise their tax affairs.

Revenue has stated that where an employer fails to take this opportunity to review its workforce practices and make a relevant disclosure, and the liabilities from misclassification subsequently come to light, then tax, interest and penalties will be applied in full.

What favourable terms are available?

• Revenue will not apply interest or penalties to the payment of the payroll tax due arising from bona fide classification errors.
• No gross-up will apply to the amounts paid to any individuals who were incorrectly treated as contractors.
• The lower rate of income tax (20%) and a USC blended rate of 3.5% will apply in determining the payroll tax due.
• A credit will be available for tax paid by individuals through self-assessment against the payroll tax due by the employer.

Note 1: The above only applies to 2024 and 2025.

Note 2: Actual employee and employer PRSI rates still apply.

What is excluded from the new settlement arrangement?

• The settlement arrangement does not apply to any individual who, under the “Code of Practice on Determining Employment Status” in effect prior to October 2023, should have been classified as an employee.
• The settlement arrangement does not apply to any individual who should have been classified as an employee based on any published decision or determination of the Department of Social Protection, the Workplace Relations Commission, the Tax Appeals Commission or a court.
• Where Revenue is of the opinion that the misclassification has arisen from either careless or deliberate behaviour, the full liability to income tax, USC and PRSI and interest and penalties will be pursued as provided for under the terms of all relevant legislation.
• The settlement arrangement does not apply to any intervention which was open prior to 20 October 2023, i.e. the date the Supreme Court judgment was delivered in the Domino’s Pizza case.

When is the deadline for filing the settlement for 2024 and 2025?

The settlement in relation to 2024 and 2025 must be filed with Revenue no later than 30 January 2026. These terms will only apply to cases where the misclassification was genuine and not previously under Revenue intervention.

How can Forvis Mazars help?

We can assist employers with:

• understanding the Revenue guidelines in relation to (a) the new settlement arrangement from Revenue and (b) the five-step decision-making framework that businesses are required to use to determine whether a worker is an employee or self-employed for tax purposes since 2024.
• reviewing any contractors who were engaged by your business in 2024 and 2025, in line with the five-step decision-making framework, to determine if any of those contractors should have been treated as employees instead of self-employed for tax purposes.
• calculating the payroll tax liabilities due for 2024 and 2025 and making a disclosure to Revenue by 30 January 2026.

If you require assistance in relation to the above, please contact your usual Forvis Mazars contact or a member of the Forvis Mazars employment tax team below.