mdrotteveel dissertation 28092016

Mathijs Rotteveel

Independent contractors: Tax me if you can! Supervisor: Dr Bénédicte Sage-Fuller

Student number: 114224460 14,993 words 28-9-2016

Table of Contents

1. Introduction p. 1

2. Employed or Self-Employed? Painting the whole picture p. 5

2.1 Introduction p. 5

2.2 Leaving traditional structures p. 5

2.3 The legal framework p. 7

2.4 The control test p. 11

2.5 The integration test p. 13

2.6 The entrepreneurial test p. 14

2.7 The intention of the parties p. 15

2.8 The current hybrid approach p. 15

2.9 The Revenue Code of Practice p. 17

2.10 Conclusion p. 19

3. Revenue’s struggle with one-man companies p. 21


3.2 New structures p. 21

3.3 Tax schedules and PRSI Classes p. 23

3.4 Different benefits p. 27

3.5 Deductible expenses p. 27

3.6 Introduction of the Relevant Contract Tax p. 32

3.7 The Contractors Project p. 33

3.8 Taxpayers facing uncertainty p. 37


4. UK’s IR35: sixteen years of controversy p. 40


4.2 Tax differences between employees and company owners p. 40

4.3 Introduction of IR35 and MSC regulation p. 43

4.4 Continuous opposition against IR35 and MSC laws p. 47

4.5 Revenue’s dealing with unwilling stakeholders p. 52


5. Conclusion p. 56

Bibliography p. 61

1

1. Introduction

Recent news publications suggest that Ireland urgently has to cope with a serious problem

called “bogus self-employment”. Past year we could read about an “Investigation into impact

of bogus self-employment”,1 “Bogus self-employment in the Irish construction industry”2 and

“Bogus self-employment encouraged by tax system”3 among many other stories. These news

articles and some research reports present the prominent existence of bogus employment in

Ireland as a given fact. As we can read in the first sentence of a research report published by

Think Tank on Action for Social Change (TASC): “Work on Irish construction sites often

involves bogus self-employment.”4 According to the Irish Congress of Trade Unions (ICTU)

this unlawful way of working comes with serious financial harm to Irish Government,

because it reduces the amount of tax collected. ICTU in December 2015 claimed an estimated

loss to Irish Revenue of 640 million euro between 2007 and 2016, only in the construction

industry.5

Just a month after ICTU’s news on Revenue’s significant loss due to bogus self-employment,

the Government took action. In January 2016 the Department of Finance and the Department

of Social Protection published a consultation paper entitled “Use of Intermediary-type

Structures and Self-employment Arrangements”,6 wherein it invites interested parties to give

their opinion on probable legislative measures to address the loss to the Exchequer coming

from arrangements wherein workers who “would otherwise be an employee, establish a

1 RTÉ News, “Investigation into impact of bogus self-employment”, (28-1-2016).

2 RTÉ News, “Bogus employment in construction costing State – ICTU”, (3-12-2015).

3 Patsy McGarry, “‘Bogus self-employment’ encouraged by tax system, Tasc says”, (17-6-2016), The Irish Times.

4 Alicja Bobek and James Wickham for TASC (Think Tank for Action on Social Charge), “Bogus self-employment in the

Irish construction industry”, (31-3-2016).

5 Irish Congress of Trade Unions (ICTU), “False Economy, The Growth of ‘Bogus Self-Employment’ in the Construction

Industry” (Winter 2015), printed by Trade Union Labour.

6 Department of Finance and Department of Social Protection, “Consultation on the use of Intermediary-Type Structures

and Self-employment Arrangements” (28-1-2016), Upper Merrion Street, Dublin.

2

company to provide their services”.7 The “intermediary-type structures” mentioned in the title

are used to set up these kind of arrangements.

In the consultation, Government refers to other countries who have, according to

Government, addressed the issues with self-employed in their tax laws, like Australia,

Canada and New-Zealand. However, special attention goes to the United Kingdom (UK)

where intermediary structures to turn employees into self-employed workers or directors

and/or shareholders of a company have given rise to concern as far back as the 1980s.8 In the

UK already in 2000 new tax legislation was introduced to cut the presumed loss to the

Exchequer caused by these structures. The Irish consultation on these intermediary structures

states that this legislation was extended later on, because the self-employed and their advisors

developed new structures to avoid the newly introduced rules.9

Does this mean that the created intermediary companies created, were not as easy to catch by

the new UK tax legislation as the Government and the Exchequer previously thought? And

what where the consequences of the legislation introduced in the UK? Did the independent

contractors unwind their intermediary structures to become employees again? Could the

Exchequer show impressive revenue growth because of the introduction of the new

legislation? To get answers to all these queries it is necessary to get an answer to one simple

research question: Before introducing new legislation, what can the Irish legislature learn

from the attempts in the UK to cut the presumed tax loss caused by workers operating

through intermediary companies?

The main reason to do a comparative analysis between the current Irish tax jurisdiction and

the UK jurisdiction, concerning tax legislation for self-employed workers and their

7 Ibid, p. 1.

8 Ibid, p. 5.

9 Ibid.

3

intermediary structures, is the fact that Irish Government mainly refers to the UK example in

its consultation. However, there are more reasons to choose the UK and not another

jurisdiction as a comparison. First, much of Irish legislation is inspired from UK law.10

Second, in this area of law many UK cases are a significant part of Irish case-law.11 Finally,

the intermediary structures used in Ireland and the UK are comparable. The Personal Service

Companies (PSC’s) and Managed Service Companies (MSC’s) that are being used to become

independent contractors instead of employees have the same legal structure in Ireland as they

have in the UK.

To answer the primary research question, it was first important to find out what all these

journalists and researchers meant with “bogus self-employment”. In news articles bogus self-

employed people have been described as workers like any other employee. However, because

they have set up a limited company, they have become their own bosses. Some articles even

suggest that they have become self-employed against their own will at a click of the mouse

by their employers.12 If they would not agree with their employer to become self-employed

they would be out of work. The question came up if this would be possible within the Irish

employment legislation. So in the first chapter the legal difference for tax purposes between

an employee and a self-employed within the current Irish legal framework is described. This

way the question of what really is meant with “bogus self-employment” will be answered.

Chapter Two will describe the issues Revenue has with enforcing tax law on the growing

cohort of independent contractors. As will be seen in Chapter One Ireland has a sophisticated,

but laborious structure to decide who is an employee, who is self-employed and who is

director and/or shareholder of his or her company. However, deciding who is who in the Irish

10 Albert Keating, “Jurisprudence positivist legal theory” (2016), 34(9) Irish Law Times, p. 132-136 and Thomas Mohr,

“The Colonial Laws Validity Act and the Irish Free State” (2008), 43 Irish Jurist, p. 21-44.

11 See for example ECR Consulting Ltd v Revenue and Customs Commissioners, [2011] UKFTT 313, Ricketts v

Colquhoun, [1925] 10 TC 118 and Samad Samadian v Revenue and Customs Commissioners, [2014] UKUT 13.

12 McGarry, supra note 3.

4

labour market does not seem to be Revenue’s main problem. The next step seems to be a

more cumbersome one: the collection of taxes from workers who qualify as directors or

shareholders of a company. Chapter Two will provide a description of the legal framework

regarding taxation of directors and shareholders and a description of the different attempts

Government and Revenue have undertaken to get them to pay the amount of tax they legally

owe.

The third chapter concerns the measures the UK Government has introduced since 2000 to

get a grip on the tax liabilities of directors and owners of intermediary companies over there.

It will also outline the reasons why UK legislation is commonly seen as partly failed and why

it is recently put under review again.

In the Conclusion answers will be given to the primary research question: Before introducing

new legislation, what can the Irish legislature learn from the attempts in the UK to cut the

presumed tax loss caused by workers operating through intermediary companies?

5

2. Employed or Self-Employed? Painting the whole picture.

2.1 Introduction

The Irish Government has noticed a shift from traditional structures between employers and

employees to a labour market wherein more people work in their one-man company or via

other intermediary structures. According to Government this shift has resulted in an opaque

market place wherein “bogus self-employment” is common practise, or as stated in the recent

consultation wherein “two individuals who perform the same services for an end-user could

have different tax outcomes and different entitlements to social insurance benefits”.13 This

chapter examines the accuracy of this statement for tax purposes, considering the current

legal framework and the relevant case-law.

2.2 Leaving traditional structures

Is there a difference between an employee and a self-employed contractor? And if there is,

what would it look like? The legal difference between an employee and a self-employed

contractor, for tax purposes, has been subject of debate between employers, employees,

politicians and academics for many years. This difference is also the main issue described in

the consultation paper Use of Intermediary-type Structures and Self-employment

arrangements that has been published by the Department of Finance and the Department of

Social Protection in January 2016.14 According to the former Minister for Social Protection,

Joan Burton, and the Minister for Finance, Michael Noonan, there is a noticeable shift in the

Irish labour market from traditional employment structures between employers and their


and Self employment Arrangements” (28-1-2016), Upper Merrion Street, Dublin, p. 4.

14 Ibid.

6

employees to self employed contractors and their clients.15 They write that:

“The use of intermediary-type structures is becoming more prevalent as a means of

providing labour. At its simplest, an individual worker who might otherwise be

engaged as an employee by the person who uses his or her services, provides the

services through an intermediary in the form of a “personal service company” or a

“managed service company”.” 16

One of the consequences of this presumed shift from a tax perspective, is that not the

employer via the PAYE (Pay as you earn) system is responsible for paying income tax for his

employees, but the worker through his or her intermediary structure.17 This noticed shift to

self employement is not a recent phenomenon. Crogan already in 2000 notices an increase in

self employment in “certain sectors”.18 He sees the trend emerging in “booming economic

areas” like the service, telecommunications, and IT industries.19 More recently the Irish

Congress of Trade Unions (ICTU) points at significant growth of what they call “bogus” self-

employment in the construction industry. It states that “from a low of 24% in 2005 (near the

EU-15 average) self-employment has accelerated by over 50%”20 and concludes that “if

current trends continue it is reasonable to assume the construction industry will be populated

overwhelmingly by bogus self-employed workers in the near future”.21 Available figures

produced by Eurostat, however, do not show any growth of self employed people – bogus or

not – in Ireland so far. In 2014 Eurostat counts 11.3 self-employed on every 1.000 Irish

15 Ibid, p. 1.

16 Ibid.

17 Ibid, p. 2.

18 Richard Crogan, “The Trend Towards Self- Employed Contractors – Opportunities and Pitfalls” (2000), 7(7) Commercial

Law Practitioner, p. 159.

19 Ibid.


Industry” (Winter 2015), printed by Trade Union Labour, p. 8.

21 Ibid.

7

citizens, compared to 12.2 in 2006 and 12.5 in 2009.22

The figures above show it is difficult to get a clear conclusion on the size of the growth of

self-employment or if there is any growth at all. However, the observation made by the

ministers that the Irish labour market is moving towards a more complex range of

employment relationships23 seems to be a correct one. The world of labour has changed

during the last 20 years, which has had it impact especially on the pharmaceutical,

information technology and construction sectors.24 Because of the increase in short-term

project work, the pace of innovation and the mobility of talent, businesses increase their

flexibility and more and more turn to self-employed contractors.25

2.3 The legal framework

Also fiscal matters are often key for young people to chose to work in flexible and “quasi

enterpreneurial ways”.26 Leighton and Wynn state that these young contractors do not

“consider themselves employees, but neither are they small businesses (SMEs), as they do

not employ others... They are non-employees/non-SMEs who frequently seek work through

agencies and make use of limited companies or other types of organisations and networks”.27

These are the “personal service companies ” (PSC) and “managed service companies” (MSC)

the Ministers are writing about in their Consultation.28 Neither the term “personal service

company” nor “managed service company” is defined by law. According to the Select

Committee on Personal Service Companies of the House of Lords a PSC is:

22 Eurostat Data Explorer, Self-employment by sex, age and citizenship, updated 2-3-2016.

23 Department of Finance and Department of Social Protection, supra note 1, p. 1.

24 Irish Tax Institute (ITI), “Response to Consultation on the use of Intermediary-type Structures and

Self-employment Arrangements” (31-3-2016), p. 10.

25 Ibid.

26 Patricia Leighton and Michael Wynn, “Classifying employment relationships - more sliding doors or a better regulatory

framework?” (2011), 40(1) Industrial Law Journal, p. 11.

27 Ibid.


8

“understood generally to mean a limited company, the sole or main shareholder of

which is also its director, who, instead of working directly for clients, or taking up

employment with other businesses, operates through his company. The company

contracts with clients, either directly or through an agency, to supply the services of

its director”.29

Self-employed are the only owner of that newly created company and have the ability to

expand their company by purchasing assets and employing staff. They are also fully

responsible for the remittance of their taxes and the control of the expenses they claim. Next

to the possibility of setting up a PSC self-employed could also opt for creating a MSC. This is

a company in which they, together with other individual contractors, are one of the

shareholders. As stated earlier also the term “managed service company” is not defined by

law. The HM Revenue & Customs of the United Kingdom describes it as a scheme “which

provides the services of workers and which does so through a managed service company

scheme”.30 It adds that the scheme should fulfil four criteria:

the services of workers are provided by companies to others;

the majority of the money earned by the worker for their services provided

through the company is paid to the worker;

a person termed the “scheme provider” (or their associate) exercises control

over the company’s finances or general management; and

29 House of Lords, Select Committee on Personal Service Companies, “Personal Service Companies, Report on session

2013-14” (7th April 2014), Published by the Authority of the House of Lords, p. 7.

30 HM Revenue & Customs, “Tackling Managed Service Companies” (December 2006), St Clements House, Norwich, p.

19.

9

the workers whose services are being provided do not exercise control.31

The difference with a PSC is that in a MSC the self-employed is not responsible for the

correct remittances for taxes. He has outsourced that task to a service provider.32 According to

PCSO we should add the “umbrella structure” as a popular structure for formerly self-

employed to participate in the labour market.33 Herein the worker becomes an employee of

the service provider. For the service provider he undertakes short term contracts. However he

does not display the full characteristics of a self-employed person or business.34

These structures from a tax perspective balance on the line between employment en

enterpreneurship. They are being used in a grey area in which it is very difficult to answer the

question what the difference is between an employee and a self-employed. Therefore it is

very difficult to establish the correct tax liabilities of the worker. The existence of this area is

partly created by the legislator that did not draw a clear legislative line between employees

and self-employed. The terms “employed” and “self employed” are not defined in the Taxes

Consolidation Act 1997, nor in the Social Welfare Consolidated Act (SWCA). According to

Moyne, there is “no exhaustive list... to determine the employment status”.35 According to

McAvoy:

“The question of whether an employee/employer relationship of some other type of

relationship exists betwee two parties may... cause a problem from time to time.

Generally, this difficulty arises in cases where it is unclear whether a person is

31 Ibid, p. 19.

32 Ibid, p. 19 and Professional Contractors Services Organisation (PCSO), “PCSO Submission to Department of Finance

Consultation on the Use of Intermediary-Type Structures and Self-Employment Arrangements” (31-3-2016), p. 12.

33 Professional Contractors Services Organisation (PCSO), “PCSO Submission to Department of Finance Consultation on

the Use of Intermediary-Type Structures and Self-Employment Arrangements” (31-3-2016), p. 24.

34 Ibid.

35 Louise Moyne, “Employed vs Self Employed” (Dec. 2011), 4 Accountancy Plus, p. 28.

10

providing services as an employed person so as to be taxable under Sch E in respect

of the resulting emoluments or is acting in a self-employed capacity so as to be

chargeable under Sch D on the profits of a trade or profession.”36

Generally, states Moyne, “if there is a contract of service between two parties, then there is a

contract of employment. A contract for services implies the self employed status of the

service provider”.37 The difference between a contract of service and a contract for services

has been considered by the Supreme Court in the case Henry Denny & Sons (Ireland) Ltd t/a

Kerry Foods v Minister for Social Welfare (hereinafter Denny).38 The legal question was

wether shop demonstrator Ms Mahon was an employee for social welfare law purposes or

not. If Ms Mahon was an employee, according to Meenan39 she would be an insurable person

for the purposes of the social welfare of the Social Welfare (Consolidation) Act 1981.40 Ms

Mahon's contract described her as an independent contractor and purported to make her

responsible for her own tax affairs. She was given a daily rate and a mileage allowance. She

was not under supervision of Denny but was given written instructions to carry out her work.

Materials were supplied and Denny needed to consent possible sub-contracting. The case was

brought to the High Court where Keane J decided Ms Mahon was an employee. He stated

that: “In general a person will be regarded as providing his or her services under a contract of

service and not as an independent contractor where he or she is performing those services for

another person and not for himself or herself. The degree of control exercised over how the

36 McAvoy Associates (Dara Burke, Joe McAvoy and John Ward), “Irish Income Tax” (2012), Dublin, Ireland, Bloomsbury

Professional, p. 1168.

37 Moyne, supra note 35, p. 27.

38 Henry Denny & Sons (Ireland) Ltd t/a Kerry Foods v Minister for Social Welfare, [1998] 1 IR 34.

39 Frances Meenan, Employment Law (November 2015), Ireland, Round Hall, Section 2, Par. 10.

40 Under section 5(1)(a) of the 1981 Act “Every person over the age of 16 years and under pensionable age is 'an insured

person' for the purposes of the legislation if he or she is employed in any of the employments specified in Part I of

Schedule1.” According to Meenan Paragraph 1 of part I refers to: Employment in the State under any contract of service

or apprenticeship, written or oral, whether express or implied, and whether the employed person is paid by the employer

or some other person, and whether under one or more employers, and whether paid by time or by the piece or partly by

time and partly by piece, or otherwise, or without any money payment.

11

work is to be performed, although a factor to be taken into account, is not decisive.”41

As Keane J did in the Denny case,42 every case has to be considered on its own merits. As a

result of case law, tests have been developed to assist in determining a taxpayer’s status.43 In

the following paragraphs I will describe the major tests, which have been used in Irish courts.

2.4 The Control Test

The first test to consider is the Control Test, firstly established in Yewen v. Noakes.44 It was

applied in Roche v Kelly and Co. Ltd.45 and considers the element of control that the

employer can exercise over the employee in order to determine the relationship between the

two parties. In this case Roche would build a barn for a farmer for a lump sum of £300. He

would supply contruction materials and build the barn under his own specifications. His

progress was monitored but not his working methods. He had considerable experience and

had done comparable jobs for Kelly in the past. Roche suffered an injury while constructing

the barn. The question was wether Roche was an employee and who would be responsible for

the insurance. Walsh J said:

“While many ingredients may be present in the relationship of master and servant, it

is undoubtedly true that the principal one, and almost invariably the determining one,

is the fact of the master’s right to direct the servant not merely as to what is to be

done but as to how it is to be done. The fact that the master does not exercise that

26 Denny, supra note 38.

42 Ibid.

43 Mark Barrett and David Clancy, “Employed v Self-Employed Status”, 23(1) Irish Tax Review (2010), 23(1), p. 60,

Frances Meenan, Employment Law (November 2015), Ireland, Round Hall, Chapter 2, Par. 2. and McAvoy Associates

(Dara Burke, Joe McAvoy and John Ward), “Irish Income Tax” (2012), Dublin, Ireland, Bloomsbury Professional, p.

1168-1179.

44 Yewen v Noakes, [1880] 6 QBD 530.

45 Roche v Kelly and Co. Ltd., [1969] IR 108.

12

right, as distinct from possessing it, is of no weight if he has the right.”46

It was decided that Roche was an independend contractor. According to Moyne “the right to

interfere with how the individual carried out their work and the fact that the farmer did not

exercise control over the individual were important findings and became known as the

control test”.47

Nowadays, the control test does not always provides the needed guidance.48 It was developed

in the 19th century, when the relation between master and servant was much clearer than now.

Moreover, it is not suited for skilled workers, who are told what to do but who have their own

responsibility as to how to do it. This point was made in Cassidy v Ministry of Health.49 In

this case the master of a ship was clearly an employee, but the ship owners were not entitled

to tell him how to navigate their ship. In Re Sunday Tribune the court recognised that in a

modern context supervisors might tell their skilled workers what to do. But, given their lack

of expertise, they are not able to explain how to do it. Therefore, the control test was no

longer of universal application.50

Because of changing employment relationships, according to Moyne “obviously further

clarification was required”.51 Additional tests were laid down following the case of Ready

Mix Concrete (SE) Ltd v Minister of Pensions and National Insurance.52 In this case the

Court had to determinate if the driver and owner of a lorry was an employee of Ready Mixed

46 Ibid.


48 Per Keane J. in Henry Denny & Sons (Ireland) Ltd t/a Kerry Foods v Minister for Social Welfare, [1998] 1 IR 34 at 49;

[1998] E.L.R. 36.

49 Cassidy v Ministry of Health, [1951] 2 KB 343.

50 Re Sunday Tribune, [1984] IR 505, see also Mark Barrett and David Clancy, “Employed v Self-Employed Status”, 23(1)

Irish Tax Review (2010), 23(1), p. 60.

51 Ready Mix Concrete (SE) Ltd v Minister of Pensions and National Insurance, [1968] 2 QB 497 and Moyne, supra note

35, p. 28.

52 Ready Mix Concrete (SE) Ltd v Minister of Pensions and National Insurance, [1968] 2 QB 497.

13

Concrete or not. The court decided that he was if three tests were met:

1. The mutual obligations test – if there is no obligation on the employer to offer work or

on the other party to do the work, there is no contract of service.

2. Whether the employee agrees that he will be subject to the other’s control expressly or

impliedly to a sufficient degree to make the other party his employer.

3. Whether the provisions of the contract are consistent with it being a contract of

service e.g. employer’s financial risk, employees entitlement to holiday pay, pension

etc., employer’s opportunity to profit.53

2.5 The integration test

The integration test was applied by Denning LJ in Stevenson, Jordan & Harrison Ltd v

MacDonald and Evans.54 The issue considered here is whether the worker is integrated into

the employer's business. If he is more integrated he is more likely to be an employee. As

Denning LJ stated: “A man is employed as part of the business, whereas under a contract for

services, his work, although done for the business, is not integrated into it but is only

accessory to it.”55

Clarke J also considered the control test in Re Sunday Tribune Ltd. He examined that a

former employee who had been employed on a shift basis as a sub-editor, who worked under

the guidance of a chief editor, was an employee, as was a journalist who was paid a fixed sum

a week for writing columns. However, a person who wrote regular articles, for which he got

paid seperately, was considered to be a freelancer. According to Daly and Doherty the

problem with the integration test is that the courts have not clearly spelt out what is meant by


54 Stevenson, Jordan & Harrison Ltd v MacDonald and Evans, [1952] ITLR 101.

55 Ibid.

14

'integration'.56 They state:

“it applies quite well to professionals over whom the employer does not have direct

control, it does not fit so well with others, such as outworkers or sub-contractors, who

may be highly integral to the employer’s business without necessarily being

employees. This is particularly the case given the growth in the use of outsourcing by

employers”. 57

2.6 The entrepreneurial test

This test consists to determine if a person is working for another or for himself, on his own

account. The question in this test is: who takes the entrepreneurial risks? To answer this

question in the UK case Market Investigations v Minister for Social Security58 sub-questions

have been asked, like: Does the person performing the services supply his own equipment

and can he hire his own helpers? Other questions would be if he carries financial risks and

what opportunity he has to make a profit. Finally it also matters to what extend he carries the

responsibility for investment and management.59 Relying on Cooke J. in Market

Investigations v Minister for Social Security Keane J. in the Denny case suggested that the

fundamental test to be applied is this:

“Is the person who has engaged himself to perform these services performing them as

a person in business on his own account?’. If the answer to that question is ‘yes’, then

the contract is a contract for services. If the answer is ‘no’, then the contract is a

contract of service. No exhaustive list has been compiled and perhaps no exhaustive

56 Brenda Daly and Michael Doherty, “Principles of Irish Employment Law” (2010), Dublin, Clarus Press, p. 45.

57 Ibid.

58 Market Investigations Ltd v Minister of Social Security, [1969] 2 QB 173.

59 Ibid.

15

list can be compiled of considerations which are relevant in determining that

question, nor can strict rules be laid down as to the relative weight which the various

considerations should carry in particular cases. The most that can be said is that

control will no doubt always have to be considered, although it can no longer be

regarded as the sole determining factor.” 60

2.7 The intention of the parties

As stated earlier the issue of whether an individual is an employee or self-employed is

determined by all of the facts. This issue cannot be resolved only by declarations of involved

parties written down in, for example, a contract.61 In the Denny case the company was not

satisfied with the way the appeals officer regarded the terms of the written contract which

stated that the individual was deemed to be an “independent contractor”.62 However, Murphy

J was satisfied that the appeals officer had concluded rightly to consider ‘‘the facts and

realities of the situation on the ground’’.63 He did establish the true relationship between the

parties, rather than merely relying on the ‘‘labels ascribed by them to their relationship’’.64

2.8 The current hybrid approach

As stated by Cox et al. “the question as to what the correct test is to be applied in determining

the legal status of a worker remains a vexed and complex one”.65 Before Cox goes over to the

teachings of Denny66 case he adds that:


61 See Mark Barrett and David Clancy, “Employed v Self-Employed Status”, 23(1) Irish Tax Review (2010), 23(1), p. 61,

Frances Meenan, Employment Law (November 2015), Ireland, Round Hall, Chapter 2, par. 2-22 and Louise Moyne,

Louise, “Employed vs Self Employed” (Dec. 2011), 4 Accountancy Plus, p. 28.

62 Denny, supra note 38, p. 3.

63 Ibid, p. 6.

64 Ibid, p 13.

65 Neville Cox, Val Corbett and Desmond Ryan, “Employment Law in Ireland ” (2009), Dublin, Clarus Press, p. 71.


16

“It would seem that the approach that has now found favour in both Ireland and the

United Kingdom is a general, multifaceted one. This approach views the relationship

between the parties holistically and may be summarised by the question; was the

worker in business on his of her own account?”67

The then described Denny case considered various tests and criteria in determining the status

of the employment relationship. It introduced the economic test considering whether the

individual is economically independent from the person requiring the work to be done.68 As

described earlier the case related to the status of a supermarket demonstrator, who was paid

by the supplier of the free samples she gave away. In the High Court Carroll J said that the

relevant case law made clear that a number of tests could be applied:

1. the control test

2. the integration test

3. the economic reality test (the three Mixed Concrete questions) and

4. the entrepreneurial or 'own business' test (Market Investigations).69

Keane J said in Denny:

“In general a person will be regarded as providing his or her services under a

contract of service and not as an independent contractor where he or she is

performing those services for another person and not for himself or herself. The

degree of control exercised over how the work is to be performed, although a factor to

67 Cox, supra note 52, p 66.


69 Market Investigations Ltd v Minister of Social Security, supra note 58, see also Mark Barrett and David Clancy,

“Employed v Self-Employed Status”, 23(1) Irish Tax Review (2010), 23(1), p. 62.

17

be taken into account, is not decisive.”70

He concludes that “each case must be considered in the light of its particular facts and of the

general principles which the Courts developped”.71 This was later confirmed by the decision

of Edwards J in Agriculture and Food v Barry and Others (hereinafter Barry).72 Daly and

Doherty add that “this requires the exercise of judgement and analytical skill and it is not,

according to Edwards J, possible to arrive at the correct result by testing the facts of the case

in some rigid, formulaic way.”73 Mummery J in Hall (HMIT) v Lorimer74 compares the

exercise to contemplating an impressionist painting:

“To decide whether a person carries on business of his own account... is not a

mechanical exercise of running through items on a check-list to see whether they are

present in, or absent from, a given situation. The object of the exercise is to paint a

picture form the accumulation of detail. The overall effect can only be appreciated by

standing back from the detailed picture which has been painted, by viewing it from a

distance and by making an informed, considered, qualitative appreciation of the

whole.” 75

2.9 The Revenue Code of Practice

The difficulties in deciding the employment status of individuals have been around for many

years. Therefore, in 2000 the Department of Social, Community and Family Affairs, the

Revenue Commissioners and representatives of the social partners set up a body – the


71 Ibid.

72 Minister for Agriculture and Food v Barry and Others, [2008] IEHC 216, see also: Mark Barrett and David Clancy,

“Employed v Self-Employed Status”, 23(1) Irish Tax Review (2010), 23(1), p. 62.

73 Daly and Doherty, supra note 56, p. 48.

74 Hall (HMIT) v Lorimer, [1993] 66 TC 349.

75 Ibid.

18

Employment Status Group (ESG) – which published a report on this topic.76 The initial goal

of the report was to finally create “a uniform definition of ‘employee’ based on clear criteria,

which will determine the employment status of an individual”.77 As this approach was found

to be too rigid by many, the ESG decided to just confirm the usual indications of employment

in the Code of Practice and distribute this to an audience as big as possible.78

According to O'Shaughnessy in chosing the “usual indications” the ESG leaned heavily on

the conclusions of the Denny case which were largely reproduced in the “Code of Practice for

Determining Employment or Self-Employment Status of Individuals” of The Revenue.79

In this Code of Practice the 'enterprise test' of the Denny case was, according to

O'Shaughnessy, “presented as the most important or fundamental test in the ESG report,

which stated that 'the overriding consideration or test will always be whether the person

performing the work does so as a person in business on their own account'”.80 This rigid

interpretation of the Denny judgment was criticised by Edwards J in the Barry case.81 Herein

Edwards J indicated that the 'enterprise test' is only on a par with the other factors taken into

account.82 Also in the case of Brightwater Selection (Ireland) Limited v Minister for Social

and Family83 the rigid interpretation of the Denny judgment was criticised. Revenue has not

been deaf to these remarks, but has reflected them in the most recent Code of Practice. Herein

the 'enterprise test' has a much lighter role. The line quoted before on the 'enterprise test' as

'the overriding consideration or test' has been replaced by:

76 Employment Status Group, Report of the Employment Status Group – PPF (2000), Dublin.

77 Ibid.

78 Daragh O'Shaughnessy, “Employed or Self-Employed? The Implications of the Brightwater Case” (2012), Issue 2 Irish

Tax Review, p. 118.

79 Irish Revenue Commissioners, “Code of Practice for Determining Employment or Self-Employment Status of

Individuals”, updated June 2010.

80 O’Shaughnessy, supra note 78, p. 118.

81 Minister for Agriculture and Food v Barry and Other, supra note 72.

82 Ibid.

83 Brightwater Selection (Ireland) Limited v Minister for Social and Family Affairs, [2011] IEHC 510.

19

“An important consideration in this context, will be whether the person performing

the work does so “as a person in business on their own account”. Is the person a free

agent with an economic independence of the person engaging the service? This

consideration can be a useful indicator of the person’s status and should be

considered in conjunction with the other criteria listed in this code of practice.”84

O’Shaughnessy argues for more changes in the Code of Practice.85 His main argument for

that can be found in the judgement of the Barry case.86 He states that the court reaffirmed that

“there must be a mutuality of obligation between employer of employee. This hurdle must be

crossed before any of the other factors determining employment can be considered”. This

conclusion might, according to O'Shaughnessy, be reason for further amendments of the Code

“to recognise the High Court's restated opinion on the importance of 'mutuality of obligation'

in employment cases”.87

2.10 Conclusion

As stated in the introduction the Irish Government has recently observed a shift in the labour

market from traditional to more opaque structures. As result it is, according to Government,

possible that “two individuals who perform the same services for an end-user could have

different tax outcomes and different entitlements to social insurance benefits”.88 This chapter

described the legislation and case-law concerning the employment status of workers in

Ireland. As described subsequently in significant cases like Denny89, Barry90 and

84 Irish Revenue Commissioners, “Code of Practice for Determining Employment or Self-Employment Status of

Individuals”, updated June 2010, p. 2.





and Self employment Arrangements” (28-1-2016), Upper Merrion Street, Dublin, p. 4.



20

Brightwater91 there does not exist an easy formula to determine ones employment status.

Though, with painting the whole picture of one’s situation and considering all the relevant

facts, it is possible to establish the tax status for each individual at a certain place and time.

Therefore, the Government’s assertion on two individuals offering the same services with

different tax labilities does not seem to have a solid legal foundation. Government might be

rightly concerned about the enforcement issues regarding the tax liabilities of the growing

amount of contractors and their intermediary companies. Even more because those liabilities

can change with every new contract they sign. Those issues will be described in Chapter 2.

However, efficient enforcement of existing law is not the issue put forward by the Ministers

in their consultation paper Use of Intermediary-type Structures and Self-employment

Arrangements.

91 Brightwater Selection (Ireland) Limited v Minister for Social and Family Affairs, supra note 83.

21

3. Revenue’s struggle with one-man companies

3.1 Introduction

For Revenue a shift from traditional employer-employee structures to self-employment has

big consequences. It has to deal with two main issues. Firstly the determination of who is an

employee and who is not, described in Chapter One. Secondly, regarding taxpayers that do

not qualify as an employee but as a director of their own company, Revenue has concerns that

tax liabilities are often understated to the taxpayer’s benefit. Overstatement of deductible

expenses has been said to be a major issue for Revenue for years. Therefore it has initiated

different measures to counter this. This chapter will describe the current legal framework and

relevant case-law regarding taxation of directors and shareholders. Also will it analyse

Revenue’s attempts to get a grip on their deductibles.

3.2 New stuctures

The Ministers of the Department of Finance and the Department of Social Protection in their

recently published consultation paper Use of Intermediary-type Structures and Self-

employment arrangements92 express concerns that the burden of complying to tax laws, thus

filing tax returns and paying tax, is more and more shifting from employers to employees.93

According to the Ministers one of the consequences hereof is that instead of employers being

responsible for applying the PAYE system in respects of the worker, the worker becomes

responsible, via an intermediary structure.94 The notice of a shift from employment to self-

employment is not a recent one.95 It is described already in 2000 by Crogan and Revenue has



93 Ibid, p. 2.

94 Ibid.

95 Richard Crogan, “The Trend Towards Self- Employed Contractors – Opportunities and Pitfalls” (2000), 7(7) Commercial

Law Practitioner, p. 159.

22

complained about the financial consequences, since 2013 at least.96 Many parties involved

argue the financial impact of this trend on Revenue income is not clear.97 Still, the Irish

Congress of Trade Unions (ICTU) provided an estimate of the loss to Revenue of what they

call “bogus self-employment” in the construction industry: 640 million euro between 2007

and 2016.98 Although this figure is a very raw estimate, it has been quoted by numerous Irish

media99, whereafter the Ministers initiated their consultation.

In their consultation paper the Ministers refer to structures wherein the self-employed sets up

a personal service company (PSC) or a managed service company (MSC). As described in

Chapter 1 PSCs and MSCs are corporate structures through which workers offer their

services to their clients: companies.100 In PSCs, workers are the sole director or sole

shareholder of their company. In MSCs workers take no part in the on-going management or

financial control of the MSC. That control usually lies with the providor of the MSC, usually

an administration office or accountant that charges the shareholders/workers a certain fee.101

The different shareholders/workers in the MSC can hold a different class of shares in that

company. For example, Shareholder A holds class A shares, Shareholder B holds class B

shares, and so on. The shareholding entitles the workers to receives dividends, based on the

amount of payment the MSC receives for the shareholders’ work.102

96 Irish Revenue Commissioners, “Letter of Commissioner Anthony Buckley to Mr Mark Barrett, South West

Representatives Irish Tax Institute”, 22-1-2013.

97 Irish Tax Institute (ITI), “Response to Consultation on the use of Intermediary-type Structures and

Self-employment Arrangements” (31-3-2016), p. 7 and Professional Contractors Services Organisation (PCSO), “PCSO

Submission to Department of Finance Consultation on the Use of Intermediary-Type Structures and Self-Employment

Arrangements” (31-3-2016), p. 25.



99 RTÉ News, “Bogus employment in construction costing State – ICTU” (3-12-2015), Martin Wall, “Bogus selfemployed

‘cost State €600m since 2007’” (3-12-2015), Irish Times e.a.


7.

101 Ibid.

102 Ibid.

23

The Professional Contractors Services Organisation (PCSO) has also noticed the increase of

people wanting to work in PSCs and MSCs.103 The representative body for service providers

for PSCs and MSCs was set up in 2014.104 It states that 28% of the individual professionals

are short-term contractors and therefore to pay “exactly the same as any other employee i.e.

Class A PRSI”.105 But the remaining self-employed have set up structures like MSC’s or

PSC’s which they own exclusively. PCSO adds that “they are paying taxes as

director/employees and applying Class S social insurance”.106

3.3 Tax schedules and PRSI Classes

The fact that self employed set up PSCs and MSCs and become directors and shareholders of

those companies has consequences for their tax liability and liability to social charges. Their

tax status is defined in the Taxes Consolidation Act 1997,107 which is described firstly.

Afterwards will follow a description of the legal structure in which they pay their social

charges, in Ireland called the Pay Related Social Insurance (PRSI) contribution. These are

levied by Revenue under the Social Welfare (Consolidation) Act, 2005108 and passed on to the

Department of Social Protection.

Considering the payment of income tax, regarding employees and directors of PSC’s and

MSC’s, the relevant tax category would be Schedule E.109 Directors who usually are

shareholders of a PSC or MSC can provide themselves with income by paying themselves

salary or dividends. If paying salary, their income would be liable to income tax under



104 Contracting Plus, “The Professional Contractors Services Organisation Forum”, website viewed on 15-8-2016.



106 Ibid.

107 Taxes Consolidation Act, Ireland, 1997

108 Social Welfare (Consolidation) Act, Ireland, 2005.

109 Taxes Consolidation Act, Ireland, 1997, supra note 107, Section 19 and 112.

http://contractingplus.com/index.php/blog/the-professional-contractors-services-organisation-forum

24

Schedule E. Dividend payments are liable to Schedule D Case IV and subject to Dividend

Withholding Tax (DWT).110 The DWT rate for dividends under Schedule D Case IV is 20%

in 2016111 and the tax due is adjusted against the overall Income Tax liability of the tax

payer.112 Whether paying dividends or salary, to determine if one is liable to tax within

Schedule E, two questions need to be answered:

1. Is the person in employment liable to tax under Schedule E?

2. If so, what income is chargeable?

Both answers can be partly found in Section 112 TCA 1997. This Section describes who is

charged to tax and it includes the notion of “emoluments”113, which describes anything

assessable to income tax under Schedule E:

“Income tax under Schedule E shall be charged annually on every person having or

exercising an office or employment of profit mentioned in that Schedule, or to whom

any annuity, pension or stipend chargeable under that Schedule is payable, in respect

of all salaries, fees, wages, perquisites or profits whatever therefrom, and shall be

computed on the amount of all such salaries, fees, wages, perquisites or profits

whatever therefrom for the year of assessment.”114

Other than emoluments of an office, employment or pension, income tax is charged on

certain expenses, benefits in kind, payments made in connection with the termination of an

110 Taxes Consolidation Act, Ireland, 1997 Section 43, 49 and 50 or Section 20 for Schedule F if their company is quoted

(which usually is not the case).

111 Patrick Mulcahy, “Irish Taxation: Law and Practice 2016/2017” (2016), Dublin, Irish Tax Institute, p. 502. 112 Irish Revenue Commissioners, “Dividend Withholding Tax - General Information Leaflet (INFO 1 V4)”, viewed on 25-

9-2016, Section 11. 113 Ibid, Section 112: “Emoluments means anything assessable to income tax under Schedule E.”

114 Ibid, Section 112.

25

office or employment and certain pension payments not within a retirement benefit

scheme.115 In all, if there is an employment arrangement with a direct relation to the payment

in question, a Schedule E charge is placed.116

However, exeptions have occured. In the case of Reed v Seymour117 the taxpayer was a

cricket player who was given the revenues of a benefit match, played in recognition for his

long and distinguished service to the Kent Cricket Club. The House of Lords held that the

payment was not taxable under Schedule E. It was held that the profit was not arising from

his employment but was a personal gift that recognized the pleasure the patrons of the club

had had due to the qualities of his play. So some payments arising in the context of an

employment relationship may actually be seen as not being part of the employment

emolument and therefore not taxable under Schedule E.

Income tax schedule E is characterised by the “pay as you earn” (PAYE) system.118 This

system allows employers to deduct tax, Universal Social Charge (USC) and PRSI

contributions from their employees’ paycheques as it is due. Employers deduct income tax of

20% or 40% of the total emoluments119, USC between 1% and 8% and a PRSI contribution

of 4%120, before they pay their employees their earned wages. Next to the 4% PRSI

contribution paid by the employee, the company itself pays a 10.75% PRSI contritbution for

every employee on the payroll.121 Taxes have to be paid to Revenue that transfers tax income

to the Department of Finance.

115 Tom Maguire, “Irish Income Tax” (2016), Dublin, Bloomsbury Professional, p. 1291.

116 Ibid.

117 Reed v Seymour, [1927] 11 TC 625.

118 Kieran Gallery of the Irish Tax Institute, “Irish Taxation: Law and Practice 2015/2016” (2016), Dublin, Irish Tax

Institute, p. 561.

119 Ibid, p. 305.

120 Irish Revenue Commissioners, “Employers Guide to PAYE”, viewed on 18-5-2016.

121 Gallery, supra note 118, p. 305.

26

Next to withholding income tax for his or her employees, within the PAYE system employers

also withhold PRSI contributions for employees.122 Because PRSI contributions are not

considered tax but premiums for social insurance, they are forwarded to the Department of

Social Protection. The payers of PRSI are divided into 11 different Classes:

A,B,C,D,E,H,J,K,M,P and S. Employees are classified in Class A and pay 4% PRSI.123 In

contrary to their treatment concerning income tax, where they both are in Schedule E,

employees and controlling directors are treated differently for PRSI. Directors of PSC’s and

MSC’s who own more than 50% of their company are in Class S, just like self-employed.

Class S has the same contribution rate as Class A for employees, namely 4%.124 There are

differences however. Firstly, self-employed must file returns and pay preliminary tax under

the self-assessment system. Also, if an employee starts working via a PSC or MSC the

employee, now director and/or shareholder of his or her company, might earn a profit and

might pay him or herself dividends. First he or she pays him/herself an income taxed in

schedule E.125 But for tax purposes he/she could pay him/herself a low salary and high

dividends. On the profit he or she will first pay a corporate tax rate of 12.5%.126 Dividend

payments have a flat tax rate of 20%.127 One of the most significant financial differences

between PRSI Classes S and A, mainly benefits the employer or the client of the MSC or

PSC. Where in Class A the employer pays a PRSI contribution of 10.75% for every

employee, he does not pay any PRSI for that same person if he hires his/her business for a

temporary consult under Class S.128

122 Department of Social Protection, "PRSI Contribution Rate and User Guide 2016 – SW 14", website of www.welfare.ie.

123 Ibid.

124 Ibid.

125 Gallery, supra note 118, p. 305.

126 Ibid, p. 677.

127 Ibid, p. 678.

128 Department of Social Protection, supra note 122.

27

3.4 Different benefits

However, the lower tax rates for owners and directors of MSC’s and PSC’s is not free of

charge. They do give up some social welfare benefits, as there are also significant differences

between PRSI Classes A and S regarding these benefits. Self-employed individuals, directors

and majority shareholders who are categorized in Class S are not entitled to the same benefits

as employees in Class A. Among others jobseekers' benefit, invalidity pension, treatment

benefit, maternity benefit and illness benefit are not available for PRSI-payers in Class S.129

Also do directors in Class S have an other way of building up their private pension than

employees in Class A.There are also significant differences between the way individuals in

Class S and Class A can build up their private pensions. Employee pension schemes are

operated at the discretion of employers. They operate under the supervision of certain

industry-specific authorities.130 Employers need to to appoint a personal retirement savings

account (PRSA) provider to facilitate pension payments by employees. According to Barrett

and Clancy “the employer contributions made to approved schemes are not subject to tax in

the hands of the employee, and there is scope for significant funding”.131 Self employed and

directors or owners of a company can make their pension contributions through retirement

annuity contracts (RACs). There is much more flexibility in pension schemes for employees

then for self-employed or directors.132

3.5 Deductable expenses

Both employees and directors who pay tax under Schedule E are allowed to deduct expenses

129 Mark Barrett and David Clancy, “Employed v Self-Employed Status” (2010), 23(1) Irish Tax Review, p. 63.

130 Ibid.

131 Ibid.

132 Ibid, p. 64.

28

from their taxable income.133 TCA 1997 Pt 5 Ch 3 describes that income tax is charged under

Schedule E on expenses and benefits in kind.134 This rule applies to any director of an

incorporated body, irrespective of the level of his emoluments. According to Maguire “any

person who takes part in the management of the affairs of a body corporate, but who is not a

director, is treated as an employee for the purposes of TCA 1997 Pt 5 Ch 3 even if not

directly employed by the body”.135 On the contrary, a partner in a partnership or sole traders

do not have an employment to which this Chapter applies. Even, states Maguire, “he clearly

takes part in the management of his business.”136

The deductability of expenses by employees, directors and self-employed has long been a

major concern for Revenue.137 With the increase of the amount of professionals working as a

director of an MSC or PSC and operating under Schedule E, this concern has grown.138 TCA

1997, S 114 is the primary rule governing the deductibility of expenses from Schedule E

emoluments.139 It has been subject to many cases and is an issue that concerns Revenue so

here it follows in full:

“If the holder of an office or employment is necessarily obliged to incur and defray

out of the emoluments thereof the expenses of travelling in the performance of the

duties of the office or employment, or otherwise to expend money wholly, exclusively,

and necessarily in the performance of the said duties, there may be deducted from the

emoluments to be assessed the expenses so necessarily incurred and defrayed.140

133 Taxes Consolidation Act, supra note 107, Pt 5 Ch 3.

134 Ibid.

135 Maguire, supra note 115, p. 1242.

136 Ibid.


Representatives Irish Tax Institute”, 22-1-2013, p. 3 and Irish Revenue Commissioners, “Revenue's Contractors Project”,

Tax Briefing 4 of 2014, p. 1.

138 Izzy Hatfield, “Self-employment in Europe”, Institute for Public Policy Research, 14 Buckingham Street, London, p. 3

139 Taxes Consolidation Act, supra note 107, Section 114.

140 Ibid.

29

Vaisey J in Lomax v Newton finds the rules on the deductability of expenses ‘notoriously

rigid, narrow and restricted in their operation’.141 An important case considering expenses is

Ricketts v Colquhoun.142 That considered a barrister living and working in London but

holding a Recordship of Porthsmouth. He was not allowed to deduct travel expenses nor hotel

costs in order to attend hold court for the Recordship in Porthsmouth. In his judgement

Viscount Cave LC said about the travel expenses:

“They must be expenses which the holder of an office is necessarily obliged to incur

that is to say, obliged by the very fact that he holds the office, and has to perform its

duties and they must be incurred in, that is, in the cours of, the performance of those

duties. The expenses in question in this case do not appear to me to satisfy either

test.”143

Viscount Cave stated that the rule imposed two limitations. Firstly: the deductions are only

allowed if the expenses incurred in the performance of the duty. Secondly: the deduction are

further limited by the qualification that the expenses must be wholly, exclusively and

necessarily so incurred.144 Ricketts v Colquhoun was referred to in the Irish case of Phillip v

Keane.145 These cases indicate, according to Maguire, that the strictness of the rule is more

applicable to the “performance of the duty” then to the necessity.146 Maguire:

“This follows because an expense incurred in actually carrying out the agreed duties

141 Lomax v Newton, [1953] 34 TC 558.

142 Rickets v Colquhoun, [1925] 10 TC 118.

143 Ibid.

144 Ibid.

145 Phillip v Keane, [1925] I ITR 64.


30

of an employment will not normally be of a kind which is referable to the personal

circumstances or olition to the taxpayer... The objective test of necessity will, however,

still be very much in point where an expense is incurred ‘in the performance’, but the

amount of the expense is excessive or unduly extravagant.”147

As many directors of MSC’s and PSC’s work from home, domestic expenses and travel

expenses are the most relevant sources for possible deductions. First the domestic expenses,

which would be deductible if their home was recognized as “a normal place of work”.148

However, Revenue only accepts home as a normal place of work in certain specific

situations. It states that “Revenue does not accept that the location at which the

administration of the intermediary is carried out and its books kept (whether this is at the

registered office of the intermediary or at the director’s home) constitutes a normal place of

work of the director/employee”.149 Or as Croom-Johnson J held in Bolam v Barlow150:

“many of us have to take work home... but that is not what the rule says”. Therefore,

according to Maguire “in many cases the domestic expenses will fail the ‘wholly and

exclusively’ element of the Rule”151 and will not be deductible.

But directors of MSCs and PSCs have a second chance: travel expenses. Usually an

employee is based in an office and may spend substantial periods away from it.152 Revenue

describes in SP IT/2/07 which travel costs are deductible in cases like that:

147 Ibid.

148 Ibid, p. 1429.

149 Irish Revenue Commissioners, "Reimbursement of Travel and Subsistence Expenses by Intermediaries", Tax Briefing 3

of 2013, p. 3.

150 Bolam v Barlow, [1949] 31 TC 136.


152 Ibid, p. 1429.

31

“Where a business journey commences from the employee’s home or the employee

returns directly to home, then the expenses of travel and subsistence that may be

reimbursed without deduction of tax are the lesser of those incurred on the journey

between:

(a) home and the temporary work location; or

(b) the employer’s base (normal place of work) and the temporary work location.”153

According to Maguire Revenue has accepted an employee working at different locations on a

daily basis can deduct costs of travelling between those different places of work.154 As many

directors of MSC’s and PSC’s regard their homes as their office, their place of work, they

should be able to deduct costs of travelling to and from home. According to Owen v Pook a

‘place of work’ seems to be a ‘fixed location’ where the employee is required to do his/her

work.155

Also generally travelling expenses from home to a place of work are not deductible because

they do not incur “in the performance of the duties”.156 Still, travel between two places of

work undertaken to perform the duties of employment at those two places, is deductible.

Some case law suggests that also one’s home could be one of the working places.157 Then, if

the director’s base is home, also travelling expenses between his/her home office and a

temporary work location would be deductible. Interesting to notice is a recent Upper Tribunal

(UT) decision in Dr Samad Samadian v HMRC, 158 which might mark a tightening of the

Revenue practice in the United Kingdom. Judge Sales J applied the “wholly and exclusively”

153 Irish Revenue Commissioners, “Income Tax, Statement of Practice SP-IT/2/07”, July 2015 (revised), p. 10.

154 Ibid.

155 Owen v Pook, [1970] A.C. 244.

156 Irish Revenue Commissioners, supra note 149, p. 6.

157 Gilbert v Hemsley, [1980] 55TC 419, see also Maguire, supra note 112, p. 1429.

158 Samad Samadian v Revenue and Customs Commissioners, [2014] UKUT 13.

32

test strictly on Dr Samadian’s travels from a private hospitable to his home office.159 He ruled

that the costs of his drive home were not deductible because:

“Dr Samadian needs a home in which to live and carry on his private life, and it is an

inevitable feature of his journey home in the evening from the private hospitals that

part of his purpose was to get there in order to advance those private, non-business

interests.”160

After deciding on the Samadian case Sales J concluded his judgement with setting out three

categories of deductible and non-deductable travel expenses for self-employed persons.161

The first category of travel was travel related to “itinerant work” which is, according to Sales

J, deductible.162 The second, also deductible category, is between places of business. The

third, most controversial category, is between places of work and home, which the judge held

was not deductible.163

3.6 Introduction of the Relevant Contracts Tax

Issues with overstating expenses are no new phenomenom to Revenue. Because of

compliance issues in the construction industry with expenses, already in 1970 the Relevant

Contracts Tax (RCT) was introduced. Later the scope of the tax was extended to include

forestry and meat processing. But, according to Nolan, the construction sector in 2011 still

made up more 95% of the RCT tax base.164 RCT is a tax deduction system that obliges

principal contractors in mentioned industries to deduct tax at a maximum of 35% from

payments, including VAT, made to sub-contractors. In S531(1) of TCA 1997 the three

159 See also Judith Freedman and Glen Loutzenhiser, “Samadian v HMRC: deductibility of travel expenses when working

from home, Case Comment” (2014), 3 British Tax Review, p. 248.

160 Samad Samadian v Revenue and Customs Commissioners, supra note 158.

161 Ibid.

162 Ibid.

163 Ibid.

164 Seán Nolan, “Taking the Paper Burden out of RCT” (2011), 4 Irish Tax Review, p. 56.

33

conditions for withholding RCT are stated. The payment must be made by a principal, to a

subcontractor in respect of a relevant contract.165 Since reforms of RCT implemented in 2012

the tax rate that is applied to the sub-contractor depends on his/her compliance record.166

According to Revenue Commissioner Nolan for sub-contractors that are ‘unknown’ to

Revenue or who have failed to address ‘serious compliance issues’, the 35% rate still

retains.167 Others are at a 20% rate.

According to Revenue the reasons for change of the RCT in 2012 were reduction of the

administrative burden and the reduction of RCT-rates to 20%, the level of standard tax

rates.168 Since then all contacts between principals and Revenue are through an electronic

RCT service and all principals must be registered for the Revenue Online Service (ROS).

3.7 The Contractors Project

But even RCT has not managed to take away Revenue’s issues with what it calls

“contractors” understating their tax liabilities. According to Revenue those contractors cause

structural problems with which it has to cope.169 In a letter to the Irish Tax Institute (ITI) it

states:

“We are currently reviewing the tax affairs of companies and their directors, where

the main source of income is a contract or contracts 'for service' with a larger

company or companies (directly or through intermediaries), the company in question

does not appear to have a substantial business separate from these contracts, and in

moste cases the director(s) are the only employees of the company and pay tax

165 Taxes Consolidation Act, supra note 107, Section 531 (1).

166 Nolan, supra note 164, p. 57.

167 Ibid.

168 Ibid.



34

through PAYE. To date we have established that in many cases there are deficiencies

in accounting for input costs and expenses, with the result that there has been a

significant understatement of tax liability to the benefit of the director(s).”170

Revenue describes that it is focussing on expenses, not on the question if company directors

should by regarded as employees:

“We are not expressing an opinion on whether the arrangements we encounter are

valid, that is, whether the company directors should properly be regarded as direct

employees of the entity awarding the contract. This question is being reviewed and

may be adressed in the future. For the moment, our concern is that in many cases too

small a proportion of the gross contract payment is reported as liable to tax in the

hands of the contractor.”171

Revenue in November 2013 again highlighted the issue of individuals providing their

services to clients via intermediaries in a tax briefing on its Contractors Project.172 This

project was originally started in the South West of Ireland, but later on rolled out in the whole

of Ireland. It focusses on, among other issues, the review of expenses of one-man companies.

According to Revenue the main issues are claims by self-employed of expenses that did not

occur, the treatment of travel expenses and hiring family members as employees.173

Revenue describes the existence of intermediary structures, MSC’s and PSC’s, wherein the

individual is treated by the intermediary as an employee. It states that these structures have

been used for tax evasion when “intermediaries paid taxfree 'expenses' in circumstances

170 Ibid.

171 Ibid.

172 Irish Revenue Commissioners, “Revenue's Contractors Project” (November 2013), 4 Tax Briefing.

173 Ibid.

35

where the expenditure had not actually been incurred”.174 It adds that “in other

circumstances, the expenses had no relation to the business”.175

Revenue adds that some contractors were using the intermediary company, which they

usually owned, to contend that they were compliant PAYE taxpayers, while at the same time

extracting a large part of income from the company, free of tax by payments for expenses.

Revenue: “In some of the worst cases encountered, up to 70% of income was extracted in this

manner.”176

According to Maguire Revenue within the Contractors Project has taken a strong stance on

travel and substance expenses.177 He states that Revenue: “... assert that the cases selected for

audit appear to have serious issues around expenses.”178

Revenue tried to clarify its position on the taxfree reimbursement of travel expenses in Tax

Briefing 3 of 2013, entitled Reimbursement of Travel and Subsistence Expenses by

Intermediaries.179 The main point of this briefing is that “home cannot be treated as a normal

place of work”.180 Revenue adds that it “does not accept that the fact that administrative work

is carried out at home, or that home is the registered office of the intermediary alters this

position. It follows that the cost of travel to and from home may not be reimbursed free of

tax”.181

Maguire doubts Revenue’s interpretation of current legislation and argues that, as techology

has moved on, it is easier for people to work from home. If their home becomes their office,

he states that “travelling from that office to another place of work should be allowed”.182

Maguire concludes that “there are situations that the Revenue are incorrect in disalloweing

174 Ibid, p. 1.

175 Ibid.

176 Ibid.


178 Ibid.

179 Irish Revenue Commissioners, "Reimbursement of Travel and Subsistence Expenses by Intermediaries", Tax Briefing 3

of 2013.

180 Ibid, p. 3.

181 Ibid.


36

travel expenses – for example, where an employee gave up their office due to the downturn

and are now working from a pupose-built office in their garden”.183

The case law indicates that Maguire is correct in this view. In Owen v Pook184 the taxpayer

was a doctor who was required to be standby for emergency operations. He was responsible

for a patient as soon as he got a phone call from the hospital and he gave crucial instructions

over the phone to hospital staff. The taxpayer duly claimed travel costs between his home and

the hospital.

Another issue highlighted by Revenue in its Contractors Project is the hiring of family

members. It states that it “has found that, in some of the cases examined in the course of the

project, alleged employments of family members were not bonafide”.185 It emphasizes that:

“The family member must be performing services or duties in the business and rates

of pay must be similar to the rates paid to other employees doing the same type of

work. If the pay is for technical work, the employee (payee) should have the skills,

qualifications and experience necessary to carry out that work and to justify the rate

of pay.”186

Finally in its briefing Revenue makes clear that penalties occur in cases of tax default. If

taxpayers have liability to additional tax due to deliberate behaviour, they are liable to

penalties ranging from 75% to 100%, and to audit of several years if evidence of possible tax

fraud is discovered.187

183 Ibid.

184 Owen v Pook, [1970] A.C. 244.

185 Irish Revenue Commissioners, supra note 172, p. 5.

186 Ibid.

187 Ibid, p. 6.

37

3.8 Taxpayers facing uncertainty

In its letters to involved parties and in published briefings Revenue keeps emphasizing that it

is concerned about the understatement of tax liabilities of directors of contractors but that it

does not want to express “an opinion on whether the arrangements we encounter are

valid”.188 It does not want to conclude yet if the hired contractor should have been treated as

an employee and that the accompanying taxes should have been paid by the employer.

Still the threat of a possible change of opinion and penalties up to 100%, according to

intermediary representative PCSO, cause uncertainty at end clients offices. PCSO states:

“End clients want to remove any ambiguity of status and insulate themselves from any tax

and employment risks... They are concerned that Revenue Commissioners may

retrospectively impute an employee relationship and claim the associated taxes and penalties

thereon. This is an area that needs to be addressed as a matter of urgency.”189 PCSO adds:

“The present practices with regard to expenses and how they are being applied by

Revenue are creating considerable difficulties for the sector and importantly for the

end clients. There is much anecdotal evidence of professional contractors seeking

positions abroad and also a considerable number leaving the sector completely.”190

The Irish Congress of Trade Unions (ICTU) blames the Revenue Online Services (ROS) ,as

applied in construction, forestry and meat processing, for the growth of MSC’s and PSC’s in

those sectors. And for the following possible understatement of their tax liabilities. ICTU

argues that the paper based RCT registration system required “a worker to consider the nature





190 Ibid, p. 12.

38

of the (self-employed) contract they were being offered and to sign a form stating they were

genuinely selfemployed”.191 ICTU that the paper-based system “also clearly spelt out the

right and entitlements the worker would sign away by opting for self-employment: in terms

of pay, pension, sick pay, holidays, social insurance etc.”192 ICTU believes these checks have

been lost in the online system. It states that “a ‘principal contractor’ can propel a job

candidate out of the PAYE system at the click of a mouse”.193 According to Alicja Bobek of

think-tank Tasc the introduction of RCT to prevent bogus self-employment has failed.194 She

states it brings the law and tax compliance into ‘disrepute’ by generating ‘a nod-and-a-wink

culture in which everybody signs statements which they know are untrue’.195

3.9 Conclusion

The presumed shift from traditional labour relations between employers and employees to

owners of MSC’s and PSC’s and their clients is said to result in a smaller income base for

Revenue. However, because directors and majority shareholders also give up benefits, the

long term financial result for Revenue is not clear. To give a reasonable opinion on the long

term financial impact of this shift on Ireland’s budget, more research is necessary. Revenue

states a significant problem of the growing number of people working via MSC’s and PSC’s

is their overstatement of expenses. However, as shown in Lomax v Newton, Ricketts v

Colquhoun and Phillip v Keane the rules on deduction of expenses are narrow and strict. The

more recent Samadian case might even show a tightening of Revenue practice, at least in the

United Kingdom. Still, the Irish Revenue keeps trying to introduce new measures to counter

presumed overstatement of deductions. However, the Relevant Contract Tax and later The



192 Ibid.

193 Ibid.

194 Alicja Bobek and James Wickham for TASC (Think Tank for Action on Social Charge), “Bogus self-employment in the

Irish construction industry” (31-3-2016), p. 17.

195 Ibid.

39

Contractors Project have not shown the desired results. On the contrary, these measures

sometimes had an adverse effect and surely have hot helped creating a stable regulatory

environment for small and medium enterprises to flourish. With its consultation on the “Use

of Intermediary-type Structures and Self-employment arrangements” the Irish Government

now has the chance to look forward and create a solid base for small and medium enterprises

to grow, without eroding its tax base. Doing that it could learn from the United Kingdom,

where similar issues with MSC’s and PSC’s in 2000 resulted in new legislation, called IR35.

The next chapter will describe the creation of IR35, its working and the reasons it is now seen

as failed legislation.

40

4. UK’s IR35: sixteen years of controversy

4.1 Introduction

In the letter presenting their consultation on the “Use of Intermediary-type Structures and

Self-employment Arrangements”196 the Department of Finance and Department of Social

Protection give special attention to the United Kingdom (UK) where legislation was first

introduced in 2000 to address concerns about “the use of intermediary-type structures”.197

They state that in the UK : “The original aim was to deal with PSCs but it became apparent that

MSCs were also an issue and further legislation was introduced to deal with them. More

recently, legislation was introduced to deal with offshore intermediaries.”198 However, they

do not state that the intermediaries legislation – often referred to as IR35 – was met with

fierce opposition from the beginning. Neither do they describe that non-compliance has led to

new enquiries to change existing legislation199. The following chapter will describe the

faltering introduction of IR35 in the UK, the following adjustments and the reasons why it is

now commonly seen as failed legislation.200

4.2 Tax differences between employees and company owners

In the United Kingdom (UK) personal service companies (PSCs) and managed service

companies (MSCs) were seen as a threat to the fairness of the tax system. People who work



197 Ibid, p. 5.

198 Ibid, p. 5.

199 HM Revenue & Customs, “Intermediaries Legislation (IR35) discussion document” (17-7-2015), 100 Parliament

Street, London, p. 2.

200 Ibid, p. 2 and p. 4 and House of Lords, Select Committee on Personal Service Companies, “Personal Service

Companies, Report on session 2013-14” (7th April 2014), Published by the Authority of the House of Lords, p. 8 and p.

31.

41

for their own limited company can pay a lower rate of National Insurance contributions

(NICs, comparable to Irish PRSI) and a lower effective rate of tax, just like in Ireland.

The rates of income tax for employees in the UK are between 20% and 45% in 2016/2017.201

Next to that, above a threshold of £8,112 a year, employees pay National Insurance

contributions (NICs) of 12%.202 The employer’s contribution to NIC is a yearly payment of

13,8% on all income paid to the employee.203 When doing the same work via a PSC or MSC

the employee, now director and/or shareholder of his or her company, will earn a profit and

might pay him or herself dividends. On the profit he or she will pay a corporate tax rate of

20%.204 Dividend payments are tax free under 11.000£, 7.5% up to a threshold of 32,000£

and 32.5% above that.205 NICs are reduced to 9% on profits between £8,060 and £43,000 and

2% on profits over £43,000.206 Moreover, employers do not have to pay any NICs on

payments to a PSC or MSC.207

The difference between the tax contributions of contractors working as an employee or as a

director or owner of a PSC or MSC is significant and well illustrated by the following

example provided by HM Revenue & Customs (HRMC).208

Jo and Ben work as lawyers in 2015-2016 for a legal company on the same cases and both

earn £70.000 a year. Jo works as an employee. The company deducts income tax and

employee NIC’s from her salary and pays employer NIC’s on top. The total tax and NIC’s is

paid on Jo’s salary is £30.612 (£22,071 by Jo and £8,541 by her employer). Ben works

201 HM Revenue & Customs, “Tax and credit rates and thresholds for 2016-17” (25 November 2015), website of

www.gov.uk, viewed on 21-7-2016.

202 Ibid.

203 Ibid.

204 HM Revenue & Customs, “Dividend Allowance factsheet” (17 August 2015), www.gov.uk, viewed on 21-7-2016.

205 Ibid.

206 HM Revenue & Customs, “Self-Employed National Insurance rates” (April 2016), website of www.gov.uk, viewed on

21 7-2016.

207 Ibid.

208 HM Revenue & Customs, supra note 199, p. 3.

42

through a PSC. He pays himself a low salary and high dividends. His total tax and NIC’s

liability is £16,900.209 For a comparison with Irish tax rates, see the following table.

United Kingdom Ireland

Employee-employer

Income tax 20-45% 20 or 40%

Total NIC/PRSI210 25.8% 12.5-14.75%

USC211 - 1-8%

MSC/PSC-client

Corporation tax 20% 12.5%

Dividend tax 0-32.5% 20% or 40%

Total NIC/PRSI 2-9% 4%

USC - 1-8%

In the UK this significant difference in tax liability of employees and directors of PSCs and

MSCs in 1999 was seen as an issue by the then Government and HRMC. On March 9th 1999

HRMC published the now infamous press release IR35 stating that by exploiting the fiscal

advantages offered by a corporate structure, workers could “leave work as an employee on a

Friday, only to return the following Monday to do exactly the same job”.212 Doing this they

paid a substantially reduced rate of tax and national insurance, as shown in the example

above. According to HRMC these fiscal possibilities undermined fairness in British

society.213

209 Ibid.

210 Total NIC/PRSI paid by employees and employers.

211 Universal Social Charge, which is paid in Ireland, not in the UK.

212 HM Revenue & Customs, “IR35: Press Release dated 9 March 1999”, Somerset House, London.

213 Ibid, p. 1.

43

Due to unfair competition of PSCs British workers would be unable to “compete for jobs”.214

Those who operate PSCs were, again according to HRMC, underestimating the risks of

losing protection under employment law, their sick pay, maternity leave and redundancy

leave.215

Next to battling unfairness, the new legislation was also aimed at supporting small and

medium size companies. As the press release states: “without the changes it would be very

difficult to target support at genuine entrepreneurial activity - making such measures less

effective and more costly”.216 HRMC Paymaster General Primarolo later wrote in a letter to

the Times about the proposed legislation that “by tackling avoidance activity, the

Government will be able to more effectively target its support for small business towards

those who are creating wealth and employment”.217 HRMC recognized that there were many

legitimate, commercial reasons for people to set up a PSC.218 It also recognized the

advantages of flexibility and entrepreneurship for the British economy.219 Still, HRMC

called the incentives for people to work through companies when they would otherwise be

employees, and for companies to hire them to exploit the existing rules and legislation “unfair

manipulation”.220

4.3 Introduction of IR35 and MSC regulation

In April 2000 the Government introduced a new law for directors and shareholders of PSCs,

named after the already mentioned press release IR35. The original provisions were

published in the Finance Act 2000, Schedule 12.221 They have been rewritten and afterwards

214 Ibid.

215 Ibid.

216 Ibid.

217 Dawn Primarolo, “Reply to ‘Taxman’s net spreads wide confusion’”, The Times 20-11-2000.


219 Ibid.

220 Ibid.

221 Finance Act 2000, United Kingdom, Schedule 12.

44

included in the Income Tax Act 2003 (Earnings and Pensions) Part 2 Chapter 8.222 These

sections consider workers who perform services for a client involving an intermediary. If the

circumstances are such that, if these services had been provided under a contract directly

between the client and the worker, the worker would have been an employee. Then the

worker is treated as receiving earnings from employment and taxed accordingly.223

Because of the many questions Revenue got about to whom the new law would be applicable,

it published a detailed Employment Status Manual.224 The many sections and the level of

detail of the explanations highlight the complexity of the introduced legislation. Though, it

gives a clear description to whom IR35 is applicable:

Typically, the intermediary is the worker’s own personal service company (PSC) and

consists of two Directors or one Director and the Company Secretary (who are often

husband and wife). There are normally no other employees and usually only one

worker is providing their services to the client. The intermediary earns all, or almost

all, of its income from supplying the worker’s services in circumstances that would be

employment if the worker were engaged directly by the client. However, there is no

contract between the worker and the client. Instead, there is a contract between the

intermediary and the client (either directly or via an agency) and the intermediary is

paid to supply the worker’s services.

These arrangements do not come within the provisions of the Agency legislation

(ESM2001) and prior to April 2000 (ESM3011) provided an opportunity to disguise

what would otherwise be an employment relationship with the client to:

222 Income Tax Act 2003 (Earnings and Pensions), United Kingdom, Part 2 Chapter 8.

223 Finance Act 2000, supra note 221 and Income Tax Act 2003 (Earnings and Pensions) Part 2 Chapter 8.

224 HM Revenue & Customs, “Employment Status Manual”, website of HM Revenue & Customs, viewed on 16-7-2016.

45

reduce or avoid the individual’s liability to pay tax and primary Class 1 NICs,

and

reduce or avoid employers’ liability to NICs. 225

MSCs were not seen as the main problem in 2000 and stayed largely untouched, for the time

being. The relevant legislation concerning the operation of MSCs then, was Schedule 12 of

the Finance Act 2000 and the Social Security Contributions (Intermediaries) Regulations

United Kingdom 2000, 2000/727. Herein is stated that, regardless of how the composite

service company is organised,

• where an individual (“the worker”) personally performs services for the

purposes of a business carried on by another person (“the client”); but

• does so via a service company rather than directly; and

• works for the client in such a way that they would be regarded as an employee

of the client, had they worked for them directly rather than via the service company;

then

the service company will have to deduct and account for tax under PAYE and Class 1

National Insurance contributions in respect of that worker on (broadly) all of the

money the service company receives from the client in respect of work done for the

client by that worker.226

However, many professionals ensured that their contracts were stated such that they fell

outside the rules. That is, states Redston, what the “the well-advised” do.227 Contractors that

did not want to pay higher taxes according to legislation IR35, started to participate in a MSC

rather than creating a PSC for themselves. According to HRMC figures the numbers of

225 Ibid.

226 Social Security Contributions (Intermediaries) Regulations United Kingdom 2000, 2000/727.

227 Anne Redston, “Small business in the eye of the storm” (2004), 5 British Tax Review, p. 574.

46

workers in MSCs grew from around 65,000 in 2002-03 to 240,000 in 2005-06. So, with

trying to tackle the PSC issue, the Government and HRMC added fuel to the creation of

another one. Just like PSCs, MSCs are corporate structures through which workers offer their

services to their clients: companies. In contrast to PSCs, workers in MSCs are not the sole

director or sole shareholder of their company. Usually they take no part in the on-going

management or financial control of the MSC, but rather operate as worker-shareholder.228

The different shareholders in the MSC can hold a different class of shares in that company.

For example, Employee A holds class A shares, Employee B holds class B shares, and so on.

The shareholding entitles the employees to receives dividends, based on the amount of

payment the MSC receives for the shareholders’ work. Because every shareholder holds a

different class of shares, it is possible to pay everyone different dividend percentages.229

According to HMRC “the MSC scheme provider handles payments between the agency and

the MSC, deducting a fee for the work it carries out and arranging for the payment of the

worker”.230

The MSC-regulations of the Finance Act 2000 and the Social Security Contributions

(Intermediaries) Regulations United Kingdom 2000 proved to be too cumbersome to

maintain for Revenue. As stated by Revenue in the 2006 Tax Briefing called “Tackling

Managed Service Companies”

“Enforcing the current rules is difficult with MSCs because of the large and growing

number of workers involved and the resource-intensive nature of the legislative test.

Furthermore, even when a debt has been established as the result of an investigation

by HM Revenue and Customs, MSCs can escape payment because they have no assets


7.

229 Ibid.

230 Ibid, p. 8.

47

and can generally be wound up or simply cease to trade, with workers moving to a

new MSC.”231

So, new legislation was introduced for MSCs on April 6th 2007 in Chapter 9, Part 2 Income

Tax (Earnings and Pensions) Act 2003.232 This legislation works parallel to IR35 for PSCs.

This new MSC legislation had to ensure that contractors and their clients would pay the same

levels of tax and NICs as employees did. Tax relief for travel expenses would also be the

same as for employees. And the Government acquired the authority to recover MSC tax debts

from third parties.233

4.4 Continuous opposition against IR35 and MSC laws

Already before the IR35 law was introduced in April 2000 the opposition against it was

fierce. Representative groups of contractors, employers and scholars doubted the figures

substantiating it, the Government’s intentions with the new law and its efficient working.234

They argued that the new rules did not solve any problems concerning self-employment and

taxation, but merely exacerbated them.

While emphasizing its strive to fairness, from the beginning it was clear that IR35 was also

intended to increase total Revenue income. Actually the first sentence of the first press

release states that “changes are to be introduced to counter avoidance”.235 The magnitude of

that presumed avoidance became clear in the second press release. Revenue stated it would

gather £475 million in additional yearly tax revenues because of the introduction of the new

legislation.236 However, only a few months afterwards this number was raised to £900 million

231 Ibid, p. 3.

232 Income Tax Act 2003, supra note 222.


234 See Philip Ross, Freedom to Freelance... Beginning the fight against IR35 (2012), Great Britain, Amazon, p. 217 and

Institute of Chartered Accountants in England and Wales, “Towards a better tax system” (2000), Moorgate, London, p. 6.


236 HM Revenue & Customs, “Personal services provided through intermediaries, preventing avoidance: preserving

flexibility”, 23-9-1999, website of Nationalarchives.gov.uk, viewed on 16-7-2016.

48

and published in the Treasury Budget for the coming year 2000.237 Where this new figure

came from was unknown.238 Discussing the 2000 Treasury Budget the Shadow Paymaster

General, Richard Ottoway, asked Paymaster General Dawn Primarolo why the income via

IR35 had been raised from £475 million to £900 million.239 She did not answer the question.

Also years after the introduction of the intermediary legislation, the Government was

incapable or unwilling of providing any financial indications if IR35 was a success or not.

When asked in January 2004 about the yield from IR35, Primarolo said that “it is not possible

with any accuracy to isolate data relating solely to this legislation”.240 According to Ross,

also after this instance Primarolo has never answered the question.241

The illegibility on the possible income on IR35 might be related to the ambiguity regarding

the amount of personal service companies operating in the UK. According to Lagerberg

Revenue originally thought that around 66,000 personal service companies were in

existence.242 That figure was later revised to 125.000.243 However, the Professional

Contractors Group (PCG), an organisation set up in 1999 to battle the introduction of IR35,

claims there were between 90,000 and 120,000 PSCs in the UK in 2000.244 PCG claimed the

estimated income on the new legislation would be not more than £350 million. For a long

time after introduction of the new legislation Revenue could not produce any credible figures

on the amount of PSCs.245

The incapability or unwillingness to answer detailed questions about the quantative basis of

the law suggests that Revenue has been unable to keep track of the income provided by it, or

237 HM Revenue & Customs, “Budget 2000”, p. 139, website of gov.uk, viewed on 16-7-2016.

238 Philip Ross, Freedom to Freelance... Beginning the fight against IR35 (2012), Great Britain, Amazon, p. 201.

239 Ibid, p. 72.

240 Ibid, p. 75.

241 Ibid, p. 202.

242 Francesca Lagerberg, "The right amount of tax" (2004), 4 Private Client Business, p. 270.

243 Ibid.

244 Professional Contractors’ Group & Ors v Commissioners of Inland Revenue [2001] EWCA Civ 1945 (21st December,

2001).

245 Ross, supra note 238.

49

that the figures are much lower than expected. According to Lagerberg it does not really

matter if the absence of information is caused by one reason or another. She states that “even

if the lack of statistics is due to poor record keeping rather than a desire to mask the truth, it is

clear that the Government is still grappling with the whole issue of taxing small

companies”.246

Not only did the vagueness concerning the figures attached to IR35 invoked opposition. Also

the real intentions of the Government were doubted by many.247 Considering the intentions

for introducing the new law, one’s eye is quickly caught by the colourful language used by

the Government and HRMC. The IR35 press release of March 9th 1999, after which the PSC

law would be named, concludes with the Government’s goals: “These changes buttress the

new measures to support small and medium sized companies. Without the changes it would

be very difficult to target support at genuine entrepreneurial activity - making such measures

less effective and more costly”.248

In the second press release Paymaster General, Dawn Primarolo, states: “I am determined

that nobody should be able to avoid paying their fair share of tax and NICs just because of

the way they structure their relationship with their clients”.249 Also in the Government's

December 2003 Pre-Budget Report colourful language was used to describe measures

concerning small businesses: “The Government will therefore bring forward specific

proposals for action in Budget 2004 to ensure that the right amount of tax is paid by owner

managers of small incorporated businesses on the profits extracted from their company, and

so protect the benefits of low tax rates for the majority of small businesses.”250 One might

246 Lagerberg, supra note 242, p. 271.

247 See Judith Freedman, “Personal service companies - "the wrong kind of enterprise"” (2001), 1 British Tax Review, p. 1-

9, Francesca Lagerberg, "The right amount of tax" (2004), 4 Private Client Business, p. 266-272, Anne Redston, “Small

business in the eye of the storm” (2004), 5 British Tax Review, p. 566-581 and Philip Ross, Freedom to Freelance...

Beginning the fight against IR35 (2012), Great Britain, Amazon.

248 HM Revenue & Customs, supra note 212, (My emphasis).

249 HM Revenue & Customs, supra note 236, (My emphasis).

250 HM Revenue & Customs, “Pre-budget report 2003” (10-12-2003), website of www.webarchive.nationalarchives.gov.uk,

50

reasonably think that the right amount of tax is the tax paid according to current legislation.

And what is genuine entrepreneurial activity and a fair share and what is not? According to

Revenue, the intention of the new legislation was to distinguish small companies that create

wealth, from the ones that are set up just to avoid taxation.251 This is a task, with which even

for the smartest economists would struggle. According to Freedman the notion that it is

feasible to identify businesses which are not going to create wealth and employment is

misguided.252 Some entrepreneurs start with a small company to grow it fast, others will not.

Redston describes it colourfully, stating that “there is, for instance, no way to tell which IT

specialist will become the next Microsoft, which chef will become the new Gordon

Ramsay”.253 According to Freedman differentiating wealth producing from non-wealth

producing and growing from static businesses “is a problem that has dogged small business

policy”.254

According to Lagerberg the Government seems to be suspicious of small companies,

especially where funds are extracted mainly by low salaries and high dividends.255 She

emphasises that the fact that more contractors are setting up small companies is mainly

thanks to tax reliefs initiated by the Government to support economic growth.256 Lagerberg

states that:

“The drive to incorporate was caused primarily by the Government offering a nil

starting rate of corporation tax for profits up to £10,000. The result was that a

business with profits of around £15,000 could save tax of well over £2,000 by

operating through a company rather than remaining as a sole trader. The maths

viewed on 22-7-2016, (My emphasis.).

251 HM Revenue & Customs, “IR35, Frequent Asked Questions”, www.webarchive.nationalarchives.gov.uk, viewed on 22-

7-2016.

252 Judith Freedman, “Personal service companies - "the wrong kind of enterprise"” (2001), 1 British Tax Review, p. 3.

253 Anne Redston, “Small business in the eye of the storm” (2004), 5 British Tax Review, p. 579.

254 Ibid.

255 Lagerberg, supra note 242, p. 266.

256 Ibid.

51

alone was enough to drive hundreds of thousands of businesses to move from being a

sole trader to a corporate structure.”257

She states the new law is introduced as a result of the fact that Revenue seems to be

“scratching around to seek to block any area where they perceive potential revenue is

escaping its clutches”.258

Next to the lack of a financial foundation and doubtful intentions representative groups of

contractors, employers and scholars doubt the efficient working of the new law.259 They

argue that the new rules did not solve any problems concerning self-employment and

taxation, but merely increased them. The ambiguity of the law - wherein businesses are

treated as employees - itself might not have helped.

Freedman is clear in her criticism. She states that with IR35 “the Government has produced

legislation which does not achieve its aims and confuses rather than clarifies”.260 According

to her the new legislation “does little to encourage an actual move to direct labour and does

not extend employment rights to those taxed as if they were employees under the new

regime”.261 Busby stipulates the uncertainty IR35 creates.262 According to her the main

difficulties are experienced by those individuals caught by IR35, deemed to be employees for

taxation purposes, but, by virtue of their membership of a service company, denied

corresponding employment rights.263 Not many self-employed might seek entitlement to full

rights, because of the short term financial gains of working via a MSC or PSC. Consequently,

adds Busby, “one possible effect of this may be the insistence of unscrupulous employers that

257 Ibid.

258 Ibid.

259 See Philip Ross, Freedom to Freelance... Beginning the fight against IR35 (2012), Great Britain, Amazon, p. 217 and

Institute of Chartered Accountants in England and Wales, “Towards a better tax system” (2000), Moorgate, London, p. 6.

260 Freedman, supra note 252, p. 1.

261 Freedman, supra note 252, p. 2.

262 Nicole Busby, “Case Comment, IR35: resolution of a taxing problem?” (2002), 31(2) Industrial Law Journal, p. 172.

263 Ibid.

52

workers retain responsibility for the payment of tax and National Insurance, thereby escaping

employment costs and corresponding obligations”.264

4.5 Revenue’s dealing with unwilling stakeholders

The legal fundamentals of IR35 have been challenged in the High Court by the PCG, but

were successfully rebutted by British Revenue.265 The case was initiated by the PCG because

it was convinced that the provisions on PSCs and MSCs of the Welfare Reforms and

Pensions Act (1999) and the Finance Act (2000) were incompatible with European law and

hence unenforceable. The PCG regarded IR35 as “state aid”. It would be “in breach with the

fundamental EC right of establishment” and would be in breach of the fundamental right

protected by the European Convention on Human Rights in that it amounts to a “confiscation

of property”.266 The EC Treaty267 provides that a Member State cannot impose restrictions on

the freedom of nationals or companies from another state to establish him- or herself in the

host state.268 PCG tried to prove that foreign contractors had a disadvantage establishing

themselves in the UK because of “lack of certainty as to the tax to which they will be subject

or the substantial tax disadvantages that they will occur”.269

In his verdict Lord Justice Auld emphasizes that the IR35 legislation discussed does not have

impact on every self-employed individual. Auld J: “Indeed it does not apply to such an

individual at all, unless his self-employed status is near the borderline and so open to question

or debate.”270 According to Auld J that question has to be determined by case law, for

264 Ibid.

265 Professional Contractors’ Group & Ors v Commissioners of Inland Revenue [2001] EWCA Civ 1945 (21st December,

2001)

266 Ibid and Philip Ross, Freedom to Freelance... Beginning the fight against IR35 (2012), Great Britain, Amazon, p. 269.

267 Treaty Establishing the European Community, Feb. 7, 1992, [1992] 1 C.M.L.R. 573.

268 Ibid, Chapter 2, Article 42.

269 Ross, supra note 238, p. 269.

270 Professional Contractors’ Group & Ors v Commissioners of Inland Revenue, supra note 244.

53

example Market Investigations v Minister of Social Security271 and Hall (Inspector of Taxes)

v Lorimer.272

However, the court chose to uphold the legality of the scheme, because no European case-law

existed which prevented Revenue combatting tax avoidance in this way. This does not mean

the new law made this battle an efficient one. As Auld J concluded employment status should

be established by case law, which is extensive. Next to this big win, Revenue has had mixed

successes in court. Especially when taxpayers challenging their new status as employee were

represented by specialized advisers, a significant part of the cases were lost by Revenue.273

Next to Revenue’s mostly unsuccessful battle in court, it has to cope with the enormous

amount of labour the maintenance of the IR35 requires. Revenue has to consider the

employment status on an assignment by assignment basis. Auld J called this task

“extended”.274 According to the Office of Tax Simplification:

“The employment and self-employment boundary has always been difficult and

confused. Arguably, it has not kept pace with changes in work patterns, with people

having multiple employments, or with the nature of modern commercial relationships

and their need for flexibility. Case law does to a degree give the answer, but that is

time consuming and costly; it is also uncertain, and does itself evolve and change.

Also the OTS has received representations that some find case law complex and

difficult to apply.”275

271 Market Investigations Ltd v Minister of Social Security, [1969] 2 QB 173.

272 Hall (HMIT) v Lorimer, [1993] 66 TC 349.

273 ECR Consulting Ltd v Revenue and Customs Commissioners, [2011] UKFTT 313, Lime-IT Ltd v Justin, [2003] Sp C

342, Primary Path Ltd v Revenue and Customs Commissioners, [2011] UKFTT 454 and Tilbury Consulting Ltd v Gittins

(No.2 ) [2004], see also Redston, supra note 58, p. 574.

274 Professional Contractors’ Group & Ors v Commissioners of Inland Revenue, supra note 70, p. 4.

275 Office of Tax Simplification, “Small business tax review: Final report” (March 2011), Crown London, p. 19.

54

Redston calls the case law test for Revenue “obscure and difficult to apply”. 276 She adds

that, although high expectations of income gain for Revenue existed when IR35 was

introduced, “little has been raised”.277

Last year the UK Government finally admitted IR35 did not work effectively. In its 2015

consultation document Intermediaries Legislation (IR35) discussion document Revenue

estimates that in “2011-12 around 10,000 people paid tax under IR35”.278 This would be an

estimated “10% of those who should have paid tax on at least part of the income their PSC

receives under the legislation”.279 The reason for this disappointing percentage is, according

to Revenue, the “complexity” of the law and the “insufficient clarity concerning each party’s

responsibility for cooperation with HMRC interventions”.280 As it recognizes the “uncertainty

and complexity in determining whether an engagement falls within IR35”, Revenue is now

searching for stakeholders’ advice to improve legislation on taxation of small companies and

employees.281

4.6 Conclusion

As a large part of the case-law regarding Irish income tax law has its origin in the UK, it is no

surprise that the Government in its consultation gave special attention to recent

implementation of UK regulations on intermediary structures. As in the UK the Irish

Government and Revenue have repeatedly expressed their concerns about directors and main

shareholders of MSC’s and PSC’s understating their tax liabilities.282 Before the current Irish

Government takes steps to introduce comparable legislation to UK’s IR35 over here, it could

276 Redston, supra note 253, p. 574.

277 Ibid.


279 Ibid.

280 Ibid, p. 5.

281 Ibid, p. 1.

282 Department of Finance and Department of Social Protection, supra note 1, p. 4, Irish Revenue Commissioners, “Letter

of Commissioner Anthony Buckley to Mr Mark Barrett, South West Representatives Irish Tax Institute”, 22-1-2013 p. 1

and Irish Revenue Commissioners, "Reimbursement of Travel and Subsistence Expenses by Intermediaries", Tax

Briefing 3 of 2013, p. 1.

55

learn a lot from the mistakes made by the British Governments and Revenue. Neither the UK

Governments nor British Revenue seemed to have a solid analysis of the expected revenues

produced by the new legislation and therefore they had to keep adjusting their financial

forecasts. Also the real intentions of the British Government for introducing the new

legislation have been doubted since the infamous press release IR35 was published in 1999.

Then, the new law was presented as to promote the growth of “genuine” small and medium-

sized enterprises, but distinguishing “genuine” entrepreneurs from “bogus” enterprises set up

solely for tax reasons has been a too demanding task for Revenue to perform.283 It did not

create the needed public support and had to deal continuous protests of MSC- and PSC-

owners. This, added to the complexity and vagueness of the legislation, led to non-

compliance. Last year Revenue stated only 10% of all PSC’s fully complied with IR35284,

which supports the point that IR35 is a failure.

283 Freedman, supra note 252, p. 2 and Judith Freedman, “Defining taxpayer responsibility: in support of a general anti

avoidance principle” (2004), 4 British Tax Review, p. 334.


56

5. Conclusion

Driven by news reports on hundreds of millions of euros slipping through Revenue’s fingers,

the Irish Government is exploring the possibilities to introduce new tax legislation for

workers operating through intermediary companies. After the Irish Congress of Trade Unions

(ICTU) reported that ‘bogus’ self-employment in the construction sector had cost Revenue

640 million euros between 2007 and 2016,285 the Department of Finance and Department of

Social Protection last January presented a consultation on the “Use of Intermediary-type

Structures and Self-employment Arrangements”.286 The reason for this consultation is to find

possible measures to address the loss to the Exchequer that may arise when employees

become independent contractors, for hire via intermediary companies often called Personal

Service Companies (MSC’s) or Managed Service Companies (MSC’s).

The simplest way of solving this presumed tax problem is one a child could suggest: just

pretend the problem is not there. This is also one of the most prominent suggested solutions

Government already puts forward in its consultation: just pretend the intermediary companies

do not exist and tax their owners and shareholders as if they still were employees. Or, as

described in the consultation: “Treat the worker as a class A contributor, with the employer

contribution to be paid by the end-user.”287 As discussed in Chapter 3, this is also what the

legislator in 2000 tried to do in the United Kingdom with introducing the IR35 tax legislation.

Now, after 16 years of discussions, non-compliance, adjustments and reviews, even Revenue

admits that IR35 at least partly failed to reach its main objectives. After being vague about

the financial revenues of IR35 for many years, last year the British Her Majesty’s Revenue

and Customs (HRMC) finally admitted that only 10% of people who worked in a PSC or





287 Ibid, p. 6.

57

MSC, actually paid tax under IR35.288 Revenue’s conclusion is in line with the conclusions of

the Office of Tax Simplification (OTS), that noted that the legislation is “little used”.289 The

OTS has stated that “from the perspective of simplification, abolition of IR35 delivers the

greatest improvement”.290 The British House of Lords in its report on Personal Service

Companies and IR35, published in 2014, concludes that IR35 has design errors because it is

based on tax revenue figures that were not reliable.291 As described in Chapter 3, already in

2000 when IR35 was developed, there were many questions on its financial merits.

According to the House of Lords fourteen years later Government still had to show that the

used revenue figures to justify the implementation and continuation of the legislation are

correct.292 If not, states the House of Lords, then an abolition of IR35 looks attractive.293

A comparable issue seems to be evolving right now in Ireland. Neither the Irish Government,

nor Revenue has published credible figures to justify that there is a loss to the Exchequer

because of the emerged popularity of PSC’s and MSC’s. The only figure published so far is

the 640 million euro of ICTU. As we can read in ICTU’s report, this figure is more the result

of a wild guess than of proper academic research.294

So if the financial ground for new legislation is unstable, what else could be reason to change

current rules? In its consultation Government states that the “consequence of the use of

intermediary-type structures and self-employment arrangements is that two individuals who

perform the same services for an end-user could have different tax outcomes and different

entitlements to social insurance benefits”.295

Two people doing the same work but paying different amounts of tax, would be an unfair

288 HM Revenue & Customs, “Intermediaries Legislation (IR35) discussion document” (17-7-2015), 100 Parliament Street,

London, p. 4.

289 Office of Tax Simplification, “Small business tax review: Final report”, (March 2011), Crown London, p. 39.

290 Ibid, p. 41.

291 House of Lords, Select Committee on Personal Service Companies, “Personal Service Companies, Report on session

2013-14” (7th April 2014), Published by the Authority of the House of Lords, p. 22.

292 Ibid.

293 Ibid, p. 25.

294 ICTU, supra note 285, p. 9.


58

element in the Irish tax system which would need urgent reparation. However, this statement

needs some nuancing. There is extended regulation in Ireland and centuries of case-law

available to establish if one is an employee for tax purposes or an independent contractor, if

he or she has a contract “for service” or “of services”. There are no easy formulas to do that,

it might be a labour-intensive task to figure it out and – as happens in a Common Law system

– opinions may shift in time. Still, as described in Chapter One, with properly applying the

employment tests developed in Court it is possible to establish the employment status for tax

purposes for each individual at a certain place and time. So, it is possible to distinguish the

difference between the “two individuals who perform the same services for an end-user”, if

there is one. If there is no difference between the two within current law and considering

current case-law, Revenue could challenge the tax status of the independent contractor in

Court. If it is established that he or she does the same work as his client’s employees and

under the same circumstances, then he also should be treated as an employee, regarding tax

and social insurance benefits. As described in Chapter One, Revenue has tried to make its

task easier by giving the ‘enterprise test’ a heavier role in establishing employment status.

This comes forward in Revenue’s Code of Practice of 2010. After receiving criticism in Court

on this too rigid interpretation of the Denny judgement, the role of the enterprise test has been

reduced again, to level the importance of the other described tests.

Therefore, the proper establishment of one’s employment status still is a delicate and

laborious task. Especially because every new assignment of every independent contractor has

to be tested on its own merits. Chapter Two covers the way Revenue is trying to enforce

current regulations within a complex, continuously changing environment. It repeatedly has

stipulated that overstatement of deductible expenses of contractors is one of the major issues

it has to deal with. The introduction of the Relevant Contract Tax (RCT) and the Contractors

Project were meant to increase Revenue’s grip on deductibles, but have not produced the

59

desired results. On the contrary, many argue that the introduction of RCT has made it easier

for employers to convince their employees to become independent contractors.296 Therefore,

RCT is said to increase Revenue’s issues with tax liabilities of independent contractors.297

So now Government has come up with the mentioned consultation on the “Use of

Intermediary-type Structures and Self-employment Arrangements”.298 Where the RCT and

Contractors Project have not delivered, maybe a new law turning contractors into employees

could increase tax income. But before designing new legislation, it might be good to look to

the UK. Or as stated in my research question: Before introducing new legislation, what can

the Irish legislature learn from the attempts in the UK to cut the presumed tax loss caused by

workers operating through intermediary companies?

The history of IR35 in the UK shows that introducing a law tackling the tax issues with self-

employed is no guarantee for success. Because of strong opposition against IR35, its weak

financial foundation, doubtful intentions and its inefficient working, Revenue now has to deal

with an estimated compliance rate of 10%.299

Before designing new legislation focussing on PSC’s and MSC’s it would be recommended

for Government to further research the Irish population of these companies and intermediary

structures alike, to get a better view on its motivations, financials and tax liabilities. As stated

before, the ICTU only has produced a rough guess on the financial harm to Revenue within

the construction sector. Also, the issue should be considered as to whether the legislator

should take into account the savings to the Social Insurance Fund from the reduced social

security entitlements of independent contractors.

The current published financial figures are insufficient for initiating a revolutionary shift in

296 ICTU, supra note 285, p. 7 and Alicja Bobek and James Wickham for TASC (Think Tank for Action on Social Charge),

“Bogus self-employment in the Irish construction industry”, (31-3-2016), p. 48.

297 Ibid.

298 Department of Finance and Department of Social Protection, supra note 286.

299 HM Revenue & Customs, supra note 288.

60

tax and employment law, legal areas that are better helped by a gradient and nuanced

adjustments than by rigorous reshapes. Also, does the legislator have to take into account the

risk of creating new issues if introducing far reaching legislation? It happened with the

introduction of RCT in Ireland and IR35 in the UK. Moreover, it needs to realize there is no

magic formula for establishing one’s tax status. It will always be judged on the sound

principles of law, taking into account one’s individual circumstances. Or, to quote Mummery

J in Hall (HMIT) v Lorimer300, the establishment of one’s tax status is only possible: “by

standing back from the detailed picture which has been painted, by viewing it from a distance

and by making an informed, considered, qualitative appreciation of the whole”.301

300 Hall (HMIT) v Lorimer, supra note 74. 301 Ibid.

61

Bibliography

Primary Sources

Statutes

Income Tax (Earnings and Pensions) Act, United Kingdom, 2003.

Finance Act, United Kingdom, 2000.

Social Welfare (Consolidation) Act, Ireland, 2005.

Social Security Contributions (Intermediaries) Regulations United Kingdom 2000, 2000/727.

Taxes Consolidation Act, Ireland, 1997.

Treaty Establishing the European Community, Feb. 7, 1992, [1992] 1 C.M.L.R. 573

Welfare Reform and Pensions Act, United Kingdom, 1999.

Case Law

Ireland

Brightwater Selection (Ireland) Ltd v Minister for Social and Family Affairs, [2011] IEHC

510.

Henry Denny & Sons (Ireland) Ltd t/a Kerry Foods v Minister for Social Welfare, [1998] 1

IR 34.

Minister for Agriculture and Food v Barry and Others, [2008] IEHC 216.

Mulvey v Coffey, [1942] I ITR 618.

Phillip v Keane, [1925] I ITR 64.

Re Sunday Tribune, [1984] IR 505.

Roche v Kelly and Co. Ltd., [1969] IR 108.

62

Stevenson, Jordan & Harrison Ltd v MacDonald and Evans, [1952] ITLR 101.

United Kingdom

Bolam v Barlow, [1949] 31 TC 136.

Cassidy v Ministry of Health, [1951] 2 KB 343.

Cowan v Seymour, [1919] 7 TC 372.

ECR Consulting Ltd v Revenue and Customs Commissioners, [2011] UKFTT 313.

Gilbert v Hemsley, [1980] 55TC 419.

Hall (HMIT) v Lorimer, [1993] 66 TC 349.

Lime-IT Ltd v Justin, [2003] Sp C 342.

Lomax v Newton, [1953] 34 TC 558.

Market Investigations Ltd v Minister of Social Security, [1969] 2 QB 173.

Moore v Griffiths, [1972] 48 TC 388.

Owen v Pook, [1970] A.C. 244.

Primary Path Ltd v Revenue and Customs Commissioners, [2011] UKFTT 454.

Professional Contractors’ Group & Ors v Commissioners of Inland Revenue, [2001] EWCA

Civ 1945 (21st December, 2001).

Ready Mix Concrete (SE) Ltd v Minister of Pensions and National Insurance, [1968] 2 QB

497.

Reed v Seymour, [1927] 11 TC 625.

Ricketts v Colquhoun, [1925] 10 TC 118.

Samad Samadian v Revenue and Customs Commissioners, [2014] UKUT 13.

Tilbury Consulting Ltd v Gittins (No.2 ), [2004] Sp C 390.

Yewen v Noakes, [1880] 6 QBD 530.

63

Secondary Sources

Books

Cox, Neville, Val Corbett and Desmond Ryan, “Employment Law in Ireland ” (2009), Dublin,

Clarus Press.

Daly, Brenda and Michael Doherty, “Principles of Irish Employment Law” (2010), Dublin,

Clarus Press.

Gallery, Kieran of the Irish Tax Institute, “Irish Taxation: Law and Practice 2015/2016”

(2016), Dublin, Irish Tax Institute.

Mulcahy, Patrick (Irish Tax Institute), “Irish Taxation: Law and Practice 2016/2017” (2016),

Dublin, Irish Tax Institute.

Maguire, Tom, “Irish Income Tax” (2016), Dublin, Bloomsbury Professional.

Meenan, Frances, Employment Law (November 2015), Ireland, Round Hall.

Ross, Philip, Freedom to Freelance... Beginning the fight against IR35 (2012), Great Britain,

Amazon.

Articles

Barrett, Mark and David Clancy, “Employed v Self-Employed Status” (2010), 23(1) Irish Tax

Review, p. 59-64.

Boon, Dominic, “Let's talk about tax: changes to IR35” (1-12-2015), 21(2) Tolley's

Employment Law Newsletter, p. 11-13.

Burke, Billy, “Relevant Contracts Tax Reviewed” (2005), 18 Irish Tax Review, p. 148-152.

Busby, Nicole, “Case Comment, IR35: resolution of a taxing problem?” (2002), 31(2)

Industrial Law Journal, p. 172-182.

Chambers, Sandra, “Brave New World: Personal-Services Companies Operating in the UK”

(2015), 2 Irish Tax Review, p. 85-88.

64

Christie, David and Hayley Bloodworth, ““IR35" and the question of employment status”

(2000), 14 Scottish Law Times, p. 115-117.

Crogan, Richard, “The Trend Towards Self- Employed Contractors – Opportunities and

Pitfalls” (2000), 7(7) Commercial Law Practitioner, p. 159-169.

Downey, Maria and Jackie Masterson, “RCT & VAT for Principals and Sub-Contractors – an

update” (2008), Irish Tax Review, p. 75-80.

Freedman, Judith, “Defining taxpayer responsibility: in support of a general anti avoidance

principle” (2004), 4 British Tax Review, p. 332-357.

Freedman, Judith, “Personal service companies - "the wrong kind of enterprise"” (2001), 1

British Tax Review, p. 1-9.

Freedman, Judith and Glen Loutzenhiser, “Samadian v HMRC: deductibility of travel

expenses when working from home, Case Comment” (2014), 3 British Tax Review, p. 248-

255.

Keating, Albert, “Jurisprudence positivist legal theory” (2016), 34(9) Irish Law Times, p. 132-

136.

Lagerberg, Francesca, "The right amount of tax" (2004), 4 Private Client Business, p. 266-

272.

Langford, Kevin, “Classification of workers: employees and independent contractors” (1998),

5(3) Commercial Law Practitioner, p. 63-69.

Leighton, Patricia and Michael Wynn, “Classifying employment relationships - more sliding

doors or a better regulatory framework?” (2011), 40(1) Industrial Law Journal, p. 5-44.

Loutzenhiser, Glen, “Income splitting and settlements: further observations on Jones v

Garnett” (2007), 6 British Tax Review, p. 693-716.

Loutzenhiser, Glen, “Operational integration of income tax and national insurance

contributions” (2011), 4 British Tax Review, p. 361-370.

Mirrlees, James, Stuart Adam, Timothy Besley, Richard Blundell, Stephen Bond, Robert

Chote, Malcolm Gammie, Paul Johnson, Gareth Myles and James Poterba, “The Mirrlees

65

Review: Conclusions and Recommendations for Reform” (2011), 32 Fiscal Studies, p. 331–

359.

Mohr, Thomas, “The Colonial Laws Validity Act and the Irish Free State” (2008), 43 Irish

Jurist, p. 21-44.

Moyne, Louise, “Employed vs Self Employed” (Dec. 2011), 4 Accountancy Plus, p. 27-28.

Nolan, Seán, “Taking the Paper Burden out of RCT” (2011), 4 Irish Tax Review, p. 56-59.

O’Hanlon, Jane, “An Update on the RCT Regime as it affects the Construction Industry”

(2008), 40(2) Accountancy Ireland, p. 71-73.

O'Shaughnessy, Daragh, “Employed or Self-Employed? The Implications of the Brightwater

Case” (2012), 2 Irish Tax Review, p. 117 – 121.

Prendergast, Andy, “ICTU’s bogus self-employment report brings matter to head” (2015), 45

Industrial Relations News, p. 16-17.

Prendergast, Andy, “Revenue defends ‘RCT’ system, says it has nothing to do with

employment rights”, (2015), 46 Industrial Relations News, p. 5-6.

Redston, Anne, “Small business in the eye of the storm” (2004), 5 British Tax Review, p. 566-

581.

Wang, Jingyi, “The OTS Small Business Tax Review: a positive start to simplify the UK tax

system” (2013), 34(3) Company Lawyer, p. 84-91.

Whiting, John, “Employment taxes - where are we going?” (2002), 1 British Tax Review, p.

42-55.

Reports

HM Revenue & Customs

HM Revenue & Customs, “Budget 2000”, website of gov.uk, viewed on 16-7-2016.

HM Revenue & Customs, “Dividend Allowance factsheet” (17 August 2015), www.gov.uk,

viewed on 21-7-2016.

http://www.cpaireland.ie/docs/default-source/media-and-publications/accountancy-plus/taxation/employed-vs-self-employed.pdf?sfvrsn=2

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/265498/hc346.pdf

https://www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet#summary

http://www.gov.uk/

66

HM Revenue & Customs, “Employment Status Manual”, website of HM Revenue &

Customs, viewed on 16-7-2016.

HM Revenue & Customs, “Intermediaries Legislation (IR35) discussion document” (17-7-

2015), 100 Parliament Street, London.

HM Revenue & Customs, “IR35, Frequent Asked Questions”,

www.webarchive.nationalarchives.gov.uk, viewed on 22-7-2016.

HM Revenue & Customs, “IR35: Press Release dated 9 March 1999”, Somerset House,

London.

HM Revenue & Customs, “Personal services provided through intermediaries, preventing

avoidance: preserving flexibility”, 23-9-1999, website of Nationalarchives.gov.uk, viewed on

16-7-2016.

HM Revenue & Customs, “Pre-budget report 2003” (10-12-2003), website of

www.webarchive.nationalarchives.gov.uk, viewed on 22-7-2016.

HM Revenue & Custums, “Self-Employed National Insurance rates” (April 2016), website of

www.gov.uk, viewed on 21-7-2016.

HM Revenue & Customs, “Tackling Managed Service Companies” (December 2006), St

Clements House, Norwich.

HM Revenue & Customs, “Tax and credit rates and thresholds for 2016-17” (25 November

2015), website of www.gov.uk, viewed on 21-7-2016.

HM Revenue & Customs, “Tax Bulletin, Issue 60” (August 2002), Somerset House, Strand,

London.

Irish Revenue Commissioners

Irish Revenue Commissioners, “Code of Practice for Determining Employment or Self-

Employment Status of Individuals”, updated June 2010.

Irish Revenue Commissioners, “Employers Guide to PAYE”, viewed on 18-5-2016.

Irish Revenue Commissioners, “Dividend Withholding Tax - General Information Leaflet

https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm3001

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/446242/Intermediaries_legislation_IR35-discussion_document.pdf

http://webarchive.nationalarchives.gov.uk/20140206145444/http:/www.hmrc.gov.uk/IR35/faq.htm

http://www.webarchive.nationalarchives.gov.uk/

http://webarchive.nationalarchives.gov.uk/20140109143644/http:/www.hmrc.gov.uk/ir35/ir35.htm

http://webarchive.nationalarchives.gov.uk/20140109143644/http:/www.hmrc.gov.uk/ir35/seprelease.htm

http://webarchive.nationalarchives.gov.uk/20140109143644/http:/www.hmrc.gov.uk/ir35/seprelease.htm

http://webarchive.nationalarchives.gov.uk/20091222074811/http:/www.hmrc.gov.uk/pbr2003/index.htm

http://www.webarchive.nationalarchives.gov.uk/

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2015-16/tax-and-tax-credit-rates-and-thresholds-for-2015-16

http://www.gov.uk/

http://webarchive.nationalarchives.gov.uk/20130129110402/http:/www.hm-treasury.gov.uk/d/pbr06_managedservicecompanies_453.pdf

https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2016-17/tax-and-tax-credit-rates-and-thresholds-for-2016-17

http://www.gov.uk/

../../../../../Downloads/code-of-practice-on-employment-status%20(2).pdf

../../../../../Downloads/code-of-practice-on-employment-status%20(2).pdf

http://www.revenue.ie/en/business/paye/guide/employers-guide-paye-expenses.html#section2

http://www.revenue.ie/en/tax/dwt/leaflets/dividend-withholding-tax-guidelines.html

67

(INFO 1 V4)”, viewed on 25-9-2016.

Irish Revenue Commissioners, “Income Tax, Statement of Practice SP-IT/2/07”, July 2015

(revised).

Irish Revenue Commissioners, “Letter of Commissioner Anthony Buckley to Mr Mark

Barrett, South West Representatives Irish Tax Institute”, 22-1-2013.

Irish Revenue Commissioners, "Reimbursement of Travel and Subsistence Expenses by

Intermediaries", Tax Briefing 3 of 2013.

Irish Revenue Commissioners, “Revenue's Contractors Project”, Tax Briefing 4 of 2014.

Irish Revenue Commissioners, “Tax Rates and Tax Bands 2016”, (viewed on 31-5-2016).

Other

Bobek, Alicja and James Wickham for TASC (Think Tank for Action on Social Charge),

“Bogus self-employment in the Irish construction industry”, (31-3-2016).

Burke, Andrew, “The role of freelancers in the 21st century British economy”, (2012)

Cranfield School of Management, London.

Collins, Micheál, “ Employee and Self-Employed Earnings in the Republic of Ireland”

(September 2015), 23 NERI Research inBrief.

Contracting Plus, “The Professional Contractors Services Organisation Forum”, website

viewed on 15-8-2016.

Department of Finance and Department of Social Protection Consultation Paper” (January

2016), Upper Merrion Street, Dublin.

Department of Finance and Department of Social Protection, “Consultation on the use of

Intermediary-Type Structures and Self-employment Arrangements” (28-1-2016), Upper

Merrion Street, Dublin.

Departmen of Social Protection, “A guide to PRSI for the Self-Employed – SW74” (May

2015), website of welfare.ie.

Department of Social Protection, "PRSI Contribution Rate and User Guide 2016-SW14”,

http://www.revenue.ie/en/tax/dwt/leaflets/dividend-withholding-tax-guidelines.html

http://taxinstitute.ie/Portals/0/Tax%20Policy/Institute%20Submission/2012/Letter%20to%20ITI%20re%20SW%20project%20January%202013.pdf

http://taxinstitute.ie/Portals/0/Tax%20Policy/Institute%20Submission/2012/Letter%20to%20ITI%20re%20SW%20project%20January%202013.pdf

http://www.revenue.ie/en/practitioner/tax-briefing/archive/2013/no-032013.html



http://www.revenue.ie/en/tax/it/leaflets/it1.html#section3

http://www.tasc.ie/download/pdf/bogus_selfemploymentfinal.pdf?issuusl=ignore

https://www.ipse.co.uk/sites/default/files/documents/research/Andrew-Burke-Report-v1.pdf

http://contractingplus.com/index.php/blog/the-professional-contractors-services-organisation-forum

https://www.welfare.ie/en/downloads/PSC%20Consultation%20Paper%20final.pdf

http://www.finance.gov.ie/what-we-do/tax-policy/consultations/consultation-use-intermediary-type-structures-and-self

http://www.finance.gov.ie/what-we-do/tax-policy/consultations/consultation-use-intermediary-type-structures-and-self

http://www.welfare.ie/en/downloads/SW74.pdf

http://www.welfare.ie/en/Pages/Class-S-2016.aspx

68

website of www.welfare.ie, viewed on 16-7-2016.

Department of Social Protection, "What does the Scope Section do?”, website of

www.welfare.ie, viewed on 18-5-2016.16 - SW 14

Employment Status Group, Report of the Employment Status Group – PPF (2000), Dublin.

Eurostat Data Explorer, Self-employment by sex, age and occupation, updated 2-3-2016.

Hatfield, Izzy, “Self-employment in Europe”, Institute for Public Policy Research, 14

Buckingham Street, London.

House of Lords, Select Committee on Personal Service Companies, “Personal Service

Companies, Report on session 2013-14” (7th April 2014), Published by the Authority of the

House of Lords.

Institute of Chartered Accountants in England and Wales, “Towards a better tax system”

(2000), Moorgate, London.

IR35 Forum, “Administration Review” (December 2014).

Irish Congress of Trade Unions (ICTU), “False Economy, The Growth of ‘Bogus Self-

Employment’ in the Construction Industry” (Winter 2015), printed by Trade Union Labour.

Irish Tax Institute (ITI), “Response to Consultation on the use of Intermediary-type Structures

and Self-employment Arrangements”, (31-3-2016).

McGarry, Patsy, “‘Bogus self-employment’ encouraged by tax system, Tasc says”, (17-6-

2016), The Irish Times.

McEnroe, Juno, “Plans to stamp out bogus selfemployment contracts are being finalised”,

(12-1-2016), Irish Examiner.

Office of Tax Simplification, “Small business tax review: Final report”, (March 2011), Crown

London.

Office of the Attorney General, “S.I. No. 312/1996 - Social Welfare (Consolidated

Contributions and Insurability) Regulations, 1996”.

Primarolo, Dawn, Paymaster General of the HRMC, “Reply to ‘Taxman’s net spreads wide

confusion’”, The Times 20-11-2000.

http://www.welfare.ie/

http://www.welfare.ie/en/Pages/What-does-Scope-Section-do.aspx

http://www.welfare.ie/

http://ec.europa.eu/eurostat/web/products-datasets/-/lfsa_esgais

http://www.ippr.org/files/publications/pdf/self-employment-Europe_Jan2015.pdf?noredirect=1

http://www.publications.parliament.uk/pa/ld201314/ldselect/ldpersonal/160/160.pdf

http://www.publications.parliament.uk/pa/ld201314/ldselect/ldpersonal/160/160.pdf

https://www.icaew.com/~/media/corporate/archive/files/technical/tax/tax%20policy/ten%20tenets%20for%20a%20better%20tax%20system.ashx

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/398912/IR35_Forum_Administration_Review.pdf

http://www.ictu.ie/download/pdf/false_economy_the_growth_of_bogus_self_employment_in_construction.pdf

http://www.ictu.ie/download/pdf/false_economy_the_growth_of_bogus_self_employment_in_construction.pdf

http://taxinstitute.ie/Portals/0/Tax%20Policy/Final%20submission%2031%20March%20pdf%20(2).pdf?utm_campaign=taxfax+-+keeping+you+informed+on+tax++-++01+april+2016&utm_medium=email&utm_source=customerminds.com&utm_content=taxfax+-+keeping+you+informed+on+tax++-++01+april+2016&utm_term=here.

http://taxinstitute.ie/Portals/0/Tax%20Policy/Final%20submission%2031%20March%20pdf%20(2).pdf?utm_campaign=taxfax+-+keeping+you+informed+on+tax++-++01+april+2016&utm_medium=email&utm_source=customerminds.com&utm_content=taxfax+-+keeping+you+informed+on+tax++-++01+april+2016&utm_term=here.

http://www.irishtimes.com/news/social-affairs/bogus-self-employment-encouraged-by-tax-system-tasc-says-1.2688141

http://www.irishexaminer.com/ireland/video-plans-to-stamp-out-bogus-self-employment-contracts-are-being-finalised-375639.html

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/199179/01_ots_small_business_tax_review_hmrc_administration_280212.pdf

http://www.irishstatutebook.ie/eli/1996/si/312/made/en/print

http://www.irishstatutebook.ie/eli/1996/si/312/made/en/print

69

Professional Contractors Services Organisation (PCSO), “PCSO Submission to Department

of Finance Consultation on the Use of Intermediary-Type Structures and Self-Employment

Arrangements” (31-3-2016).

RTÉ News, “Bogus employment in construction costing State – ICTU”, (3-12-2015).

RTÉ News, “Investigation into impact of bogus self-employment”, (28-1-2016).

Wall, Martin, “Bogus selfemployed ‘cost State €600m since 2007’” (3-12-2015), Irish Times.

http://www.rte.ie/news/2015/1203/751049-employment/

http://www.rte.ie/news/business/2016/0128/763709-bogus-self-employment/

http://www.irishtimes.com/news/ireland/irish-news/bogus-self-employed-cost-state-600m-since-2007-1.2453308

mdrotteveel dissertation 28092016

Documents