Firstly, clarification was sought on how Revenue will determine whether a taxpayer is supplying the services of an individual under the end-user’s control, rather than otherwise supplying services. Previously this was based on contract terms and working arrangements, given the changes in work patterns in recent years, the question was asked would this still continue to be the case?
Revenue Responsed that unfortunately, as we may have expected there is no short answer and that this would be based on several indicators including the following:
- The first question is whether the company in question has an establishment (i.e. premises, employees, business) beyond the conclusion of contracts for an individual contractor. This would establish that the company is in the business of providing a service to the market generally.
- The next issue is how the contract was obtained – was it through a procurement process aimed at securing a defined service, or was it recruitment of an individual with specified skills/characteristics?
- The terms of the contract will show whether it is a contract defined by completion of a project or task, or defined by period, or openended/renewable.
- Where the position is unclear, the actual arrangements will determine our view, and working arrangements, reporting/supervision, length spent with one client, actual employment experience, and other arrangements would be considered.
As often occurs a company may have a combination of contracts, some obtained through normal service procurement, and others that constitute provision of an individual’s services. In such situations, expenses arising in the business are treated as such, while travel connected with the individual’s contract are excluded from this treatment.
Secondly, an important issue that arises relates to the number of contracts that must exist to indicate that a contractor is in fact operating as a business. Revenue agreed that volume of contracts certainly indicates that the contractor is operating as a business and also if he or she is seeking and accepting contracts for project management service wherever the opportunity arises. The product consultancy service he provides is a professional service, similar to the giving of legal or accountancy advice. Finally, as always it is crucial to identify that the contractor is not under the direction of the client. If this is in fact the case, this is a business, and expenses incurred in conducting the business are allowable for tax purposes.
Tax Issues with Contractors in Ireland
Finally, an important issue which has often arisen for contractors relates to travel expenses. If an employee has a fixed base, and is required to attend for work at some other location, then expenses may be reimbursed, calculated on distance from home or fixed base, whichever is less. If however there is no fixed base the expense of getting to work is the cost of commuting, for which no deduction is allowed.
This consultation from the Irish Tax Institute does help to clarify certain items for our clients. If you are a contractor working in Ireland we can assist with your accounting and tax requirements. Simply email firstname.lastname@example.org to arrange a no obligations meeting.