FRS 102 Amendments: What Organisations Need to Know

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FRS 102 Amendments: What Organisations Need to Know

The latest amendments to FRS 102, introduced by the Financial Reporting Council (FRC), are the most significant changes to financial reporting standards in years. Effective for accounting periods beginning on or after 1 January 2026, they introduce major financial reporting changes with practical implications.

Responding to these changes has proved demanding. Organisations that plan early and assess the impact in advance are better placed to avoid audit and/or financial reporting issues, delays and misstatements and are better placed to manage the transition.

Who Will be Affected?

While the impact will vary, a range of organisations reporting under FRS 102 may be impacted, including:

  • Organisations with leased offices, vehicles, equipment or other leased property;
  • Businesses operating across multiple locations;
  • Organisations with grants, subscriptions, memberships or deferred income arrangements;
  • Organisations delivering services over time or under longer-term contracts; and
  • Organisations where contracts are complex (e.g. multiple performance obligations, variable consideration, rebates, warranties, etc.)

Even where the accounting impact may be limited, updates to existing practices, processes and reporting arrangements may be required.

Lease Accounting

The revised leasing model will require many leases to be recognised on the balance sheet through the recognition of a right-of-use asset and a corresponding lease liability. While this may appear to be a calculation exercise, successful implementation requires management judgement.  Key areas requiring assessment include:

  • Determining the appropriate lease term.
  • Evaluating extension and break options.
  • Applying short-term and low-value asset exemptions.
  • Identifying lease incentives and rent-free periods.
  • Separating lease and service components.
  • Establishing an appropriate borrowing rate.

These judgements can have a material impact on EBITDA, KPIs, loan covenants, company size thresholds and must therefore be supported by analysis and documentation. Developing a complete understanding of an organisation’s lease population may be the most time-consuming aspects of implementation.

Revenue Recognition

The revised revenue requirements introduce a model based on identifying performance obligations and recognising revenue when those obligations are satisfied. While many simpler revenue streams may remain unchanged, organisations with more complex or longer term arrangements may have to revisit existing accounting treatments and challenge assumptions. Areas that require reassessment include:

  • Service contracts.
  • Grants and funding arrangements (particularly where these involve performance obligations).
  • Membership income and subscriptions.
  • Training and educational services.
  • Fundraising activities.
  • Contracts involving multiple deliverables.

Organisations should consider whether revenue should be recognised over time or at a point in time, whether a contract contains multiple performance obligations, and whether the timing of revenue recognition remains appropriate.

Other Changes to Be Aware of

These are not the only amendments introduced by the revised FRS 102, which also includes clearer fair value measurement guidance, enhanced disclosure guidance for small entities under Section 1A, and new disclosure requirements in areas such as supplier finance arrangements and going concern.

More broadly, these amendments continue the shift towards closer alignment with IFRS, particularly in areas such as leases and revenue.

What Organisations Need to Do

To respond to these changes, organisations should:

  • Build a complete lease register;
  • Gather and review lease documentation early;
  • Review revenue streams and customer contracts;
  • Assess systems and processes;
  • Engage early.

The FRS 102 amendments are a significant change in financial reporting. Crowleys DFK can support organisations with the implementation of these changes. Our team can assist with:

  • Lease identification and assessment
  • Lease registers
  • Recognition exemptions
  • Borrowing rate assessments
  • Lease liability and right-of-use calculations
  • Opening balance sheet adjustments and ongoing support

We can also help organisations manage the revised revenue requirements through:

  • Contract reviews
  • Performance obligation assessments
  • Revenue policies
  • Transition planning including opening balance sheet adjustments and / or restatement of comparatives (where applicable)
  • Financial statement disclosures
  • Implementation support

FRS 102 Webinar

As part of our client support programme, we will be hosting a webinar in September 2026, covering the practical implications of the FRS 102 amendments.

Further details and registration information will be announced soon.

Conclusion

The 2026 FRS 102 updates mark a significant shift in financial reporting. While these changes may seem demanding, our experts are available to guide you through the transition. Please contact our dedicated FRS 102 implementation support team for further information.

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R&D Tax Credit: Key Enhancements and What They Mean for Your Business

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R&D Tax Credit: Key Enhancements and What They Mean for Your Business

Finance Act 2025 introduced significant enhancements to Ireland’s R&D Tax Credit, reinforcing its position as a cornerstone of Ireland’s innovation and foreign direct investment strategy.

Increased Credit Rate

The most notable change is the increase in the R&D Tax Credit rate from 30% to 35%, the second increase in two years. This higher headline rate strengthens Ireland’s competitiveness when compared internationally and provides greater certainty for both multinational and indigenous companies making long‑term R&D investment decisions.

Improved Cash-Refund Mechanism

Finance Act 2025 also improves the R&D Tax Credit cash‑refund mechanism by increasing the first instalment threshold from €75,000 to €87,500. This allows companies with claims below this threshold to receive the full credit upfront in year one, delivering a valuable cash‑flow benefit, particularly for SMEs and early‑stage companies.

Treatment of Employee Time

In addition, where an employee spends 95% or more of their time on qualifying R&D activities, 100% of their emoluments may now be treated as qualifying R&D expenditure. This simplifies claims for businesses with dedicated R&D staff, although robust contemporaneous documentation remains critical.

Laboratory Construction Expenditure

The legislation also clarifies that expenditure on the construction of laboratories used for R&D can qualify for the R&D Tax Credit. However, exclusion of areas deemed to be “office space” may give rise to interpretation issues, particularly where desk‑based technical work forms an integral part of laboratory activity.

Instalment Payment Clarifications

The legislation also makes clear that companies must state whether each R&D Tax Credit instalment should be treated as a tax overpayment, to be offset against another company tax liability, or paid directly by Revenue, and it clarifies when the third instalment is due.

What Businesses Should Do Next

Companies carrying out R&D activities should reassess their R&D Tax Credit position in light of these enhancements, particularly around project eligibility, employee time allocation, and cash‑refund planning, to ensure they are maximising available relief while meeting Revenue expectations.

For further information, please contact us.

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Ireland’s VAT Rate Changes from 1 July 2026: What Businesses Need to Know

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Ireland’s VAT Rate Changes from 1 July 2026: What Businesses Need to Know

Revenue has confirmed a permanent reduction in VAT rates for food, catering and hairdressing services from 1 July 2026. It is designed to alleviate some of the pressure on SMEs, such as rising energy costs, higher wages and insurance, and declining sales, while also helping to maintain jobs and sector stability. The lower rate is also intended to help households manage cost‑of‑living pressures.

What’s Changing

According to the new guidance, the VAT rate will be reduced from 13.5% to 9%. A VAT rate of 9% was first introduced as a tax subsidy during the Covid-19 period, with the current rate of 13.5% re-established in September 2023.  Unlike the previous 9% rate, which was more general and applied to hotel or similar holiday accommodation, it is more targeted and specifically applies to:

  • Restaurant and café catering services (excluding alcohol, soft drinks, and bottled water)
  • Takeaway food
  • Hairdressing services

What’s Unchanged

Households and businesses will continue to benefit from the reduced 9% rate on electricity and gas bills until 2030. VAT rates on qualifying new build apartments will remain at 9%, effective from 8 October 2025 to 31 December 2030.  This intervention aims to increase housing supply by making building apartments more viable to developers grappling with rising construction costs.

What it Means for Businesses

To prepare for the VAT reduction, businesses in hospitality, catering and hairdressing sectors should focus on the following:

  1. Update your pricing systems:
    Businesses must update their Point-of-Sale (POS) and accounting systems to correctly apply the 9% rate to relevant items from July 1st, while ensuring items that don’t qualify (like alcohol or, in some cases, hotel accommodation) remain at the 23% or 13.5% rate. Miscalculating this can lead to penalties or unexpected tax debts.
  1. Improve Margins Transparently:
    Businesses will need to decide how they intend to reflect the VAT reduction in their pricing, whether by passing savings on to customers or retaining some profit margin. All menus and service prices should be updated before 1 July 2026.Some businesses will understandably see an opportunity to offset increased energy, labour and operational costs. However, businesses should be mindful that if VAT drops from 13.5% to 9% and prices remain unchanged, customers may see this as unfair or opportunistic.
  1. Adjust Cash Flow Forecasts:
    Businesses should be aware that the lower rate will mean slightly less VAT to pay to Revenue, which may affect cash flow timing. Because of the delay between collecting VAT from customers and paying it to Revenue, many businesses effectively use this as short-term working capital. A reduced VAT rate means less of this cash on hand, increasing the need for accurate cash flow forecasts to cover day-to-day operations.

Next Steps

With the 1 July implementation date approaching, businesses should take the following steps to prepare:

  1. Review product/service catalogues to identify which items will be affected by the reduced rate and update accordingly.
  2. Update internal systems, pricing labels and menus well in advance of 1 July.
  3. Ensure staff are aware of the changes and can clearly explain any pricing changes to customers.

How We Can Help

Our Accounting & Financial Advisory team are supporting clients in preparing for the upcoming VAT changes. Whether you need assistance reviewing VAT treatment, updating systems, or assessing the wider impact on pricing and cash flow, we can help ensure a smooth and compliant transition.

If you would like to discuss how these changes may affect your business, please contact us.

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New €3 customs duty for low-value parcels imported into the EU

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New €3 customs duty for low-value parcels imported into the EU

From 1 July 2026, low-value parcels imported into the European Union will no longer benefit from customs duty relief. Instead, a fixed customs duty of €3 will apply to goods valued at less than €150 entering the EU, a change that is expected to have a significant impact on cross-border e-commerce and import compliance.

How the new €3 duty will apply

The new €3 duty will be applied to each different item in a consignment according to its tariff heading, meaning that a single parcel containing multiple product types may attract more than one charge. For example, a parcel contains 1 blouse made of silk and 2 blouses made of wool. Due to their different tariff headings, the parcel contains two distinct items and €6 in customs duty should be paid.

The measure will apply to goods entering the EU where non-EU sellers are registered in the EU’s import one-stop shop (IOSS) for VAT.

Importantly, this customs duty is separate from the proposed handling fee that is to be introduced by all EU countries before 1 November 2026.

Interim Measure

This €3 duty is an interim measure and is expected to remain in place until 1 July 2028 but may be extended. It is designed to apply until the full EU customs reform package comes into effect. At that point, the current €150 threshold will be removed entirely and goods below that value will instead be subject to the normal EU customs duty rates for the relevant products.

Implications for Cross-Border e-Commerce Traders

This represents an additional cost for non-EU traders selling into the EU. Traders should review their pricing model for the EU market to ensure profitability and should work with their carriers to ensure tariff headings for parcels entering the EU are declared accurately.

Should you require any assistance in this area, please contact us.

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Tax Relief for New Start-Up Companies

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Tax Relief for New Start-Up Companies

New start-up companies who set up and commence a qualifying trade on or before 31 December 2026 may be able to reduce their corporation tax bill for their first 5 years of trading.

The aim of the relief is to support businesses in the early stages of growth by reducing, and in some cases fully eliminating, corporation tax payable on the profits of the new trade and certain chargeable gains, helping to improve cash flow while the business is getting established.

The relief applies where the company’s total corporation tax payable for the period does not exceed €40,000. Marginal relief is also available where the total corporation tax payable is more than €40,000 but less than €60,000.

The relief available each year is linked to the total Employer’s Pay Related Social Insurance (PRSI) the company pays for its employees and directors. This includes Employer’s PRSI up to a maximum of €5,000 per employee and Class S PRSI up to a maximum of €1,000 per director.

Any unused relief arising in the first 5 years of trading, due to losses or insufficient profits, may be carried forward for use in subsequent years.

This relief is intended for genuine trading activities and does not apply to investment or passive income.

Qualifying Conditions

  1. The company must be incorporated in the State, the EU/EEA or in the United Kingdom on or after 14 October 2008.
  2. The company must set up and commence a “qualifying trade” in the period beginning on 1 January 2009 and ending on 31 December 2026. The following are not qualifying trades for the purpose of this relief:
    • A trade that was carried on previously by another person (this rules out sole traders incorporating their trade into a limited company).
    • An existing trade (this rules out forming a new company and acquiring a new trade).
    • An excepted trade (i.e. dealing in or developing land, exploration and extraction of petroleum or working minerals).
    • Service company activities that come within S. 441 TCA close company provisions.
    • A trade if carried on by an associated company of the new company would form part of the existing trade carried on by the associated company.
  3. The company does not exceed the specified levels of corporation tax due.

Example A:

A start-up company’s corporation tax for an accounting period is €20,000, referable entirely to income and gains from a qualifying trade. The total amount of qualifying Employer’s PRSI paid in the accounting period is €17,000.

The amount of relief available for the accounting period is €17,000, meaning the corporation tax referable to income and gains of the qualifying trade is reduced from €20,000 to €3,000.

Example B:

A start-up company’s corporation tax referable to income and gains from a qualifying trade for an accounting period is €20,000. The company also has corporation tax of €3,000 due on its investment income. The total amount of qualifying Employer’s PRSI paid in the accounting period is €25,000.

The amount of relief available for the accounting period is €20,000, meaning the corporation tax referable to income and gains of the qualifying trade is reduced to nil. The company must pay corporation tax of €3,000 on its investment income. The excess relief amount of €5,000 can be carried forward for use in future accounting periods following the five-year relevant period.

Example C:

The total corporation tax payable by a start-up company for an accounting period is €16,000. This refers entirely to income from a qualifying trade. The company has three employees and paid the following amounts of Employer’s PRSI in the accounting period:

Employee Details Employer’s PRSI paid €
Employee 1 2,000
Employee 2 3,000
Employee 3 6,000
Total PRSI 11,000

The amount of qualifying Employer’s PRSI is capped at €5,000 per employee. Therefore, the aggregate amount of qualifying Employer’s PRSI for the period is €10,000 (i.e. €2,000 plus €3,000 plus €5,000).

The relief available is €10,000, meaning the corporation tax of €16,000 referable to income of the qualifying trade is reduced to €6,000.

Conclusion

This relief can be particularly valuable for new businesses with employees, but careful planning at the start of the business is important to ensure the relief can be accessed and fully utilised.

Should you require any assistance in this area, please contact us.

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Updates to OECD Model Tax Convention for Permanent Establishment for Remote Working

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Updates to OECD Model Tax Convention for Permanent Establishment for Remote Working

Although cross-border teleworking already existed before the Covid-19 pandemic, its scope and impact grew considerably during and after the pandemic, and this upward trend is still ongoing.

On 19 November 2025, the OECD released significant updates to the Commentary on the Model Tax Convention (the “Commentary 2025”).

A key focus of these updates is the treatment of Permanent Establishments (PEs) in situations where employees work remotely from a home office or another location that has no formal connection to their employer. The revised Commentary provides important clarifications to Article 5 of the Convention, particularly in the context of modern, flexible working arrangements.

The Commentary on Article 5 (Permanent Establishment): Use of a Home Office

The 2025 Update introduces a new analytical framework for assessing when remote or home-working arrangements may create a Permanent Establishment (PE). The OECD’s updated guidance includes a time-based indicator and a commercial‑reason test to determine whether an employee’s home or other location abroad constitutes a fixed place of business.

  1. Time-based indicator: The guidance establishes that a home or relevant place will not be considered a fixed place of business if the individual works there for less than 50 per cent of their working time, assessed over any 12-month period.If an individual meets the time indicator i.e. works from home for 50% or more of their working time, wider facts and circumstances will be considered, with emphasis on whether the business has a commercial reason for activities in the employee’s home jurisdiction.
  1. Commercial reason test: A commercial reason will be present where the individual directly engages with customers, suppliers, associated enterprises or other persons on behalf of the enterprise; and that engagement is facilitated by the individual being located in that State.However, the mere presence of customers or suppliers does not automatically establish a commercial reason.  If there is no genuine commercial reason for working from that location, it generally will not be considered a place of business for the company, unless other specific facts suggest otherwise.

The updated Commentary contains five illustrative examples reflecting common fact patterns:

  • Example A – Luca, an IT consultant based in Ireland, spends three months working from a rented apartment in Lisbon. Because the accommodation is used only on a temporary, short‑term basis and lacks continuity, it is not regarded as a fixed place of business for his employer.
  • Example B – Emma, who normally works in Dublin, relocates temporarily to Barcelona and carries out around 30% of her duties from her home there. While her Spanish home is a “fixed” location, she works there for less than half of her time. As a result, it is not considered a place of business and does not create a PE for the company.
  • Example C – Jonas moves to Munich and performs approximately 80% of his work from his home office. He also routinely meets clients located in Germany. The home is “fixed” and, because there is a commercial reason (serving local clients), it is considered a place of business and a permanent establishment for the company.
  • Example D – Sofia is based in Porto and spends about 60% of her time working from her home office. However, she provides services to clients across several countries and only occasionally visits a local client in Portugal. Despite the high level of home‑working, there is no commercial reason for her to be in Portugal, so her home office does not constitute a place of business or give rise to a PE.
  • Example E – Aisha works almost entirely from her home in Singapore, delivering virtual support and services to customers located across Asia‑Pacific time zones. Her presence enables the company to serve those markets more effectively. In this case, the home office is fixed and commercially driven, and therefore is likely to be considered a place of business that results in a PE.

Our View

With remote working becoming an increasingly common request, whether from an employee’s home or another overseas location, businesses have faced ongoing uncertainty around potential tax implications and how best to structure their remote work policies.

Overall, the updated guidance offers more clarity and flexibility for organisations managing cross‑border remote working arrangements.  Employers are advised to monitor the frequency with which employees conduct work outside the jurisdiction of their employment contracts, carefully assess remote work policies for potential permanent establishment risks, and maintain comprehensive records of all related processes and procedures.

If you need assistance reviewing your remote working policy, or have any queries in relation to the updated commentary, please feel free to contact us.

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Revenue clarifies its position on RCT for Mixed Contracts

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Revenue clarifies its position on RCT for Mixed Contracts

Revenue previously updated its Relevant Contracts Tax Manual in June 2025 to include a detailed section on contracts for the acquisition of property, especially where both construction services and land supply are involved.

The guidance confirmed that where a contract provides for both construction services and the supply of land, only the construction services are subject to RCT. If there is a single consideration for both, the principal must apportion the amount applicable to construction services. This marks a change from previous Revenue guidance, which stated that if any part of a contract was for relevant operations (construction, meat processing or forestry), all payments under that contract were liable for RCT.

In a welcome development, Revenue has now updated its Relevant Contracts Tax Manual in February 2026 in relation to mixed contracts. Mixed contracts include elements within the scope of RCT and elements that fall outside it, for example:

  • A contract to provide design‑and‑build services to a principal; and
  • A contract for the supply and installation of systems in a building or structure.

Revenue’s most recent guidance now confirms that where a single contract price covers both RCT‑relevant and non‑RCT elements, the principal is required to apportion the consideration. RCT should then be applied only to the portion of the contract relating to construction operations.

What Does This Mean for Mixed Contracts?

  • The legislation does not provide for RCT to apply to services outside the definition of construction, meat processing, or forestry operations.
  • For mixed contracts, the contract value must be apportioned between construction services (the relevant contract) and other elements (e.g., sale of land, design services, materials).
  • Activities that are integral to an overall construction project (e.g. site clearance, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works) remain within the scope of RCT.

What Does This Mean for Repair & Maintenance Contracts?

The new guidance maintains Revenue’s position that RCT applies to contracts for repair work and to contracts for repair and maintenance work.

Takeaway for Contracts with Mixed Elements:

If you’re entering into contracts that combine construction, meat processing, or forestry operations with other services or sales, ensure you can clearly apportion the contract value. RCT will only apply to the part of the contract that relates to relevant operations.

Should you require any assistance in this area, please contact us.

 

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Taxation of Dividends from Irish Companies

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Taxation of Dividends from Irish CompaniesIn accordance with the Companies Act 2014, an Irish company may only pay a dividend out of distributable reserves. A company cannot lawfully distribute capital or pre‑acquisition profits.

All dividends must be paid proportionally to the amount of shares held, subject to any special rights attached to specific share classes.

Tax Treatment of Dividends from Irish Companies

When an Irish company pays a dividend, it is obliged to deduct Dividend Withholding Tax (DWT) at 25% from dividend payments before distributing them to shareholders. This applies to both resident and non‑resident shareholders, unless an exemption applies.

The company paying the dividend must file details of the distribution and remit withheld tax within 14 days of the end of the month in which dividends are paid.

Exemptions from Dividend Withholding Tax

Under the EU Parent/Subsidiary Directive, no DWT is deducted from any distributions made by an Irish resident subsidiary to its parent in another EU Member State. In addition, exemptions from DWT apply in the following circumstances:

  • Payment to Irish resident companies.
  • Payment is to excluded Irish resident persons – certain pension funds, charities and other approved entities.
  • Payments to qualifying non-resident individuals.
  • Payments to qualifying non-resident companies.
  • Payments to qualifying non-resident persons (not being an individual or company).

For the above categories, a completed exemption form must be retained by the company paying the dividend. The exemption forms for corporates and other non-individuals are self-certified, however, in respect of non-resident individuals, their exemption must be certified by the tax authorities in which they are tax resident. The paying company should ensure they renew any exemption certificates every six years.

In the absence of a valid exemption certificate DWT must be applied.

Personal Taxation of Dividend Income

Irish resident individuals are liable to tax on the dividends received from Irish Companies. The dividend income is added to an individual’s total income for the year and liable to tax, USC and PRSI. A credit is granted for the DWT paid.

While the focus is on dividends from Irish companies, it is useful to contrast how foreign dividends are taxed for Irish residents for example:

  • UK dividends: Taxed in Ireland on the net amount received, with no credit for UK withholding.
  • US dividends: Withholding is typically 30% but reduced to 15% with a W‑8BEN. Ireland taxes the gross, with credit for US withholding.
  • Other foreign dividends: Again, taxed in Ireland but depending on where a tax treaty exists between Ireland and the paying country and the conditions thereof, the rate of withholding tax may be reduced or provide relief in respect of the foreign tax withheld.
  • Foreign dividends received by an Irish tax resident individual may suffer Irish Encashment Tax. A credit is available an individual’s Irish tax liability for the Encashment Tax.

Corporate Tax Treatment of Dividends

Irish dividends received by Irish resident companies are considered Franked Investment Income and are exempt from Corporation Tax.

Additionally, from January 1, 2025, a participation exemption applies to qualifying foreign dividends where the shareholder holds at least 5% of the company for 12 months, making such dividends exempt from Irish corporation tax.

If foreign dividends do not meet the criteria for the participation exemption, they are typically subject to Irish Corporation Tax at the standard rate of 25%. However, a reduced rate of 12.5% applies if the dividend is paid from trading profits, provided that, during the relevant period from which the profits are derived:

  • The company distributing the dividend is resident in an EU Member State or a country with which Ireland has a Double Taxation Agreement (DTA); or
  • The main class of shares of the company paying the dividend (or its parent holding at least 75% ownership) has been substantially and regularly traded on a recognised stock exchange in Ireland, the EU, or a DTA country.

The 12.5% regime for foreign dividends has been extended to dividends paid out of trading profits by:

  • A company that is resident in a non-treaty country where the company is owned directly or indirectly by a public company; and
  • A company that is resident in a territory that has ratified the Convention on Mutual Administrative Assistance in Tax Matters.

Where foreign tax on some dividends exceeds the Irish tax payable, the excess credit may be offset against Irish tax arising on other foreign dividends where the foreign tax is less than the Irish tax.

Unused credits can be carried forward indefinitely, but must be reduced by the Irish tax rate, and offset in the same way in subsequent accounting periods.

Excess foreign tax credits arising on dividends must be split into two between credits arising on 12.5% dividends and credits arising on 25% dividends, as excess credits from 12.5% dividends cannot be offset against Irish tax on 25% dividends.

If you require any assistance in this area, please contact us.

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Revenue Announce Change to Territorial Scope of VAT Groups

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Revenue has published eBrief No. 216/25 confirming significant changes to its interpretation of VAT grouping rules in Ireland.

What’s Changed?

  • VAT grouping is now limited to Irish establishments only – a head office or branch located in Ireland.
  • Non-Irish head offices or branches of VAT group members are no longer considered part of the Irish VAT group.
  • This new guidance applies immediately to VAT groups established from the date of publication (19 November 2025).
  • Existing VAT groups have a transitional period until 31 December 2026 to comply.

Previous Position

Revenue previously treated the entire legal entity (including overseas branches) as part of the Irish VAT group. This interpretation has now changed.

Impact

From 1 January 2027, transactions between Irish VAT group members and their overseas branches will generally fall within the scope of Irish VAT.

Next Steps

Revenue advises:
“Those existing VAT Groups impacted by this change can contact their Revenue District to agree suitable transitional arrangements to ensure compliance with this guidance.”

If you have any queries, please contact us.

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Revenue Issues Guidance on Karshan Disclosure Opportunity for Employers

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Revenue Issues Guidance on Karshan Disclosure Opportunity for Employers

In October 2023, the Supreme Court delivered an important judgment on the key factors to be considered to determine whether a worker is an employee or self-employed for income tax purposes. The Court decided that the question should be resolved using a five-step process.

Revenue then published guidance in May 2024 explaining the new five-step decision-making framework. It encouraged all businesses to review the nature of any contractor-type arrangements and consider any implications the Kharshan judgement may have for them.

Revenue have recently announced Karshan Disclosure Opportunity Guidance, an opportunity for employers to correct any payroll tax issues in respect of 2024 and 2025, arising from bona fide misclassification of employees as self-employed workers without penalty or interest. The deadline for submission of disclosures to avail of these favourable settlement terms is 30 January 2026.

Businesses who engage contractors should self-review all arrangements with contractors in light of the new five-step framework to see if a disclosure is required before the 30 January 2026 deadline.

If you require our assistance with this, please contact us.

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