The Court of Appeal has ruled that delivery drivers for a company operating a Domino’s Pizza franchise should be treated as self-employed rather than employees. The decision overturned the previous ruling of the High Court. Consequently, PAYE was not deductible on the payments nor was Employer’s PRSI payable.
The agreement between the parties provided that a rostered driver did not have to turn up for work and could, if they wished, appoint a substitute to carry out their shift. Normally the right to provide a substitute would be an indicator of self-employment. In this case, however, drivers usually nominated a substitute from the company’s pool of drivers and the substitute was then paid by the company. Accordingly, it was held this was more akin to “swopping shifts” than a genuine right of substitution. The Court agreed that food delivery was in this case an integral part of the business of the company. This work was carried out by the Drivers who received a payment for wearing the Domino’s uniform and for placing the Domino’s logo on their vehicles. These payments were made irrespective of the number of deliveries. These factors were indicative of an employer/employee relationship rather than self-employment.
Despite the above factors which indicated an employer/employee relationship, the Court of Appeal reaffirmed that mutuality of obligation must be met before there can be an employer/employee relationship. “Mutuality of obligation” exists where the “employer” is obliged to provide work to the worker and the worker is obliged to carry out any work provided. If mutuality of obligation is not met, the terms of engagement will be a contract for services (self-employment) and not an employment for tax purposes.
A key issue was whether a contract with mutual obligations came into existence after a driver indicated his availability for work. By a majority of 2:1 the Court of Appeal held that there was no mutuality of obligation because a driver was not obliged to turn up for work even when they agreed for their name to be put on the roster.
This ruling has significant consequences for the tax treatment of independent contractors in the gig economy. Whether the contractor is a PAYE worker will depend on the arrangements between the two parties in each case. Indeed, the judgement refers to each individual case being fact driven. Those who engage contractors should be mindful that if PAYE is not deducted in error, the employer may have a very significant tax liability with interest and penalties.
|This summary is intended as a general guide. No action should be taken without obtaining professional taxation advice. If you have any queries, please do not hesitate to contact Purcell McQuillan Tax Partners Ltd on 01 668 2700 or email your usual PMQ contact.|
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