With changes emerging as to how Revenue focuses on locums, tax expert Geraldine Corcoran looks at the continued uncertainty over the issue facing the medical profession
In a previous article for Irish Medical Times earlier this year
(February 12, 2010, see
I outlined the tests that would be of assistance to practitioners in determining the employment status of locums whom they engage.
This matter came to the fore following the Appeal Commissioners’ decision in favour of Revenue in the MIDOC appeal, i.e. that the locum service provided was in the nature of an employment. It was hoped that the appeal against this decision to the court would provide some clarity in this area. However, that case was settled out of court and it is understood that a financial settlement was reached between the parties involved.
This is unfortunate, as in the absence of a court ruling on the facts, the area remains unclear for locums and practitioners. However, it is important for practitioners to be aware that this does not mean that all locums will now, automatically, be treated as PAYE taxpayers.
Revenue must still have regard to the Code of Practice for Determining Employment or Self-Employment Status of Individuals and also relevant case law. They have stated in a recent tax briefing:
“The code does not espouse a ‘one cap fits all’ approach, but rather stresses that ‘it is important that the job as a whole is looked at, including working conditions and the reality of the relationship when considering the guidelines. 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’.
As stated in the Code of Practice –
l Its purpose is to eliminate misconceptions and to provide clarity, and;
l It is not meant to bring individuals who are genuinely self-employed into employment status.”
However, we understand from the relevant professional bodies that, in most cases, Revenue is taking the view that medical locums are employees. Because this does not reflect the economic reality for a number of genuinely self-employed locums, it is only a matter of time before this approach will give rise to further appeals on the issue.
Meanwhile, practitioners do need to review their engagements, both past and present, to ensure that they are tax compliant. Where practitioners are engaging individuals, it is their responsibility to correctly determine the employment status of that individual. Locums must also know the capacity in which their services are engaged.
The guidelines concerning the Code of Practice for Determining Employment or Self-Employment Status of Individuals can be used as a checklist to assist in determining the status of each locum (see www.revenue.ie).
Practitioners must then consider all the factors that are present in or absent from each case, listing separately those that point towards employment and those that point towards self-employment, and then examine the overall picture that emerges.
It is recommended that practitioners carry out this review in conjunction with their professional advisors and, if possible, the locums themselves.
When the review has been carried out by practitioners, it may become clear that the locum should in fact be treated as an employee based on the facts. In that instance, the position should be regulated with Revenue without delay. Practitioners’ professional advisors will be able to explain the benefits of making a voluntary disclosure to Revenue in this instance. Revenue will, most likely, seek to backdate taxes due in relation to the engagement of locums by practitioners.
However, where locums have been fully tax compliant as self-employed individuals, it may be possible for the employer to negotiate with Revenue to reduce the effect of such backdating, where it can be shown that there was no loss of revenue to the Exchequer. Again, this would depend on the background to each case, and each doctor’s professional advisor will be able to guide them in this regard.
If it is clear to practitioners and their advisors, on the facts, to support treating the locum as self-employed, I would recommend the following action:
l A detailed report should be compiled, setting out the reasons it is believed the locum is self-employed;
l Provide back-up documentation where relevant;
l While the existence of a contract will not determine self-employment, once the facts support it, a well-drafted consultancy agreement between the practice and the locum, which sets out clearly the self-employed nature of the relationship, may be advisable;
l Apply, in writing, to your local Revenue office for a formal determination of the employment status of the locum.
This will eliminate the risk of having the tax treatment challenged at a later date by Revenue and provide clarity and certainty. However, if the Revenue reverts to practitioners with a determination that the locum is an employee and practitioners are still strongly of the opinion that they are self-employed, then a request should be submitted to Revenue for its detailed reasoning in support of its view.
It is important for practitioners to be aware that it is not the end of the road if Revenue disagrees with them. Tax law is enacted by the Oireachtas and clarified by the courts, in case law, where there is ambiguity. Every taxpayer has a right to seek a review of a decision made by a Revenue official concerning their tax affairs and there is an option to have this review carried out jointly by Revenue’s Internal Reviewer and an External Reviewer.
However, if the difference of opinion between Revenue and the taxpayer is on a point of law, the reviewers will only intervene where they consider that the Revenue opinion is clearly incorrect. If practitioners are still dissatisfied with a decision made by Revenue then, under Irish law, there is an appeal process to review a taxpayer’s affairs.
The Appeal Commissioners are an independent body and are responsible principally for the hearing of appeals by taxpayers against decisions of the Revenue Commissioners.
l Geraldine Corcoran, A.I.T.I., T.E.P,
P. Ryan & Co. Chartered Accountants,
4th Floor, Harmony Court,
Harmony Row, Dublin 2.
Tel: 01-6311200/Fax: 01-6311250
e-mail: geraldine.corcoran@pryan.ie
www.pryan.ie
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