Opportunity for Employers to Correct Payroll Tax Errors without Penalty or Interest

Strategic Insights -

Employers who unintentionally misclassified workers as self-employed between 2024 and 2025 may now correct these errors without facing penalties or interest, thanks to a new settlement arrangement offered by Revenue. This opportunity expires on 30 January 2026, and employers must have acted in good faith to be eligible. The arrangement applies to employers who, based on the guidance available prior to the Karshan Supreme Court judgement, incorrectly classified workers as self-employed. The terms of the settlement process provide for the regularization of income tax, USC, and PRSI liabilities without penalty or interest.

Key Takeaways:

  • Employers who misclassified workers as self-employed between 2024 and 2025 may now correct these errors without penalty or interest.
  • The settlement arrangement is only available for employers who acted in good faith and did not deliberately or carelessly misclassify workers.
  • Employers must have retained evidence of their analysis and review existing worker arrangements to ensure compliance.
  • Revenue's guidance emphasizes the importance of employers having clear systems in place to determine worker status.
  • The settlement process allows for the regularization of income tax, USC, and PRSI liabilities without penalty or interest.
  • Employers must submit disclosures to Revenue with payment via REVPAY by 30 January 2026 to take advantage of this opportunity.
  • Employers who fail to disclose liabilities before the deadline may face penalties and interest.
  • The Karshan Supreme Court judgement provides a clear framework for determining worker status, and employers should review their arrangements accordingly.

Statistics:

  • 2024-2025: The tax years during which employers may have misclassified workers as self-employed.
  • 30 January 2026: The deadline for employers to submit disclosures to Revenue and take advantage of the settlement arrangement.
  • 2023: The year in which the Supreme Court delivered the Karshan judgement and provided guidelines for businesses to assess worker status.
  • 2024: The year in which Revenue updated their guidance to reflect the new five-step framework for determining worker classification.

Sources:

  • Revenue's Tax and Duty Manual
  • Karshan disclosure opportunity guidance - Revenue
  • Revenue's updated guidance on determining employment status (May 2024)
  • Karshan Supreme Court judgement (October 2023)