Lisa Lokasto

Revenue’s New Disclosure Opportunity

What’s This All About?

On Sept 11th, Revenue unveiled the Karshan Disclosure Opportunity Guidance in response to the Supreme Court’s Karshan case (October 2023). This is all about whether certain workers should be classed as employees (PAYE, PRSI etc.) or independent contractors (invoice you).

Karshan disclosure opportunity guidance – [Karshan disclosure opportunity guidance]

Revenue eBrief No. 172/25

The Court said you can’t just rely on the label “contractor” (or “locum”) etc. what matters is the relationship, the facts and what the working relationship actually looks like.

Revenue has signalled that this will be an area of particular attention going forward

Why It Matters for Employers

If you get this wrong, there are real costs:

• If someone should be an employee but you treated them like a contractor, you could owe back taxes, PRSI, interest, penalties.
• Labels in contracts mean little if the reality of control, obligation etc. points the other way.
• Revenue now expects employers to apply the five-step test from Karshan and be able to show how they reached their conclusion.

The Five Questions Every Employer Should Ask (aka the Karshan Test)

Think of this as your basic checklist:

1. Work / Payment – Is there an exchange of work for pay (wage or other remuneration)?
2. Personal Service / Substitution – Does the person provide their own service, or could they send someone else (substitute)?
3. Control – How much say does the employer have over how, when, where the work is done?
4. Working Terms & Reality – Do the contract and the real working situation match employment or more like self-employment?
5. Legislative Context – Are there laws or rules in that sphere that change or add to how you assess things (e.g. in healthcare, pharmacy, public service)?

If any of the first three are “no”, there’s likely no employee status. If yes, you must then examine 4 & 5 to see whether the balance tips toward being an employee or self-employed.

Locums: What Revenue Specifically Says

Here’s where locums (medical, health care, pharmacy) come into the picture, and what employers engaging locums should know. Revenue has dedicated guidance in Tax & Duty Manual, Part 05-01-20: Individuals described as “locums” engaged in the fields of medicine, health care and pharmacy.

Part 05-01-20 – Individuals described as ‘locums’ engaged in the fields of medicine, health care and pharmacy

Key points from Revenue’s Locum Guidance:

• The term “locum” is colloquial and covers a wide variety of engagements (short-term cover, flexible hours, etc.). Just calling someone a locum doesn’t fix classification.
• Each locum engagement must be assessed using the five-step framework (from Karshan and Revenue’s Part 05-01-30 guidelines).
• Even when someone works only a few hours, or only occasionally, that doesn’t automatically make them self-employed. The factual relationship matters.

Common Locum Issues Revenue has flagged:

• Incorporation through companies (locum companies): Some locums operate via a limited company or intermediary. Revenue has reviewed such structures and has raised issues particularly around travel & subsistence, how expenses are claimed, whether the intermediary arrangements mask what is really a contract of service.
• Travel & subsistence claims: Claims must be for expenses “necessarily incurred in the performance of the duties.” Travel between home and the normal place of work generally isn’t allowable as a tax-free reimbursement. The “normal place of work” for locums using an intermediary is likely the client’s premises.
• Other expenses and deductions: To claim them, expenses must be “wholly and exclusively” incurred for the trade/profession. If not properly vouched, they may be treated as part of income/emoluments.

FAQs Specific to Locums:

• Even if a contract says “you are self-employed”, or “this is a locum contract”, that label doesn’t decide anything. It’s the fact pattern that decides.
• If a GP or hospital engages locum practitioners (doctors, nurses, pharmacists): many of those are likely to be employees (contract of service) rather than independent contractors, depending on how the engagement works in practice.

The Responsibility Is on Employers (Including for Locums)

Putting this all together, here’s what employers engaging locums (and any contractors) should do:

• Don’t assume “locum” = self-employed. Check the facts.
• Document how you apply the five-step test in each case. Keep records of how you decided, why.
• Review historic locum engagements (2024-2025) especially, see if any may have been misclassified.
• If you find that classifications might have been wrong, consider using Revenue’s Disclosure Opportunity to correct things.

Disclosure Opportunity for 2024-2025

Revenue has given the opportunity to correct bona-fide errors in payroll classification for 2024 and 2025, under the Karshan Disclosure Opportunity Guidance. For those involving locums, if classification was wrong under the above framework, those employers may come forward, adjust liabilities, avoid penalties under certain conditions.

What Employers Should Do Now

• Make a list of all locums or flexible practitioners you engage.
• For each, run through the five questions (work/payment; substitution; control; working terms; legislative context).
• Gather evidence: contracts (written), work patterns, who tells what, how much control, whether they’re integrated into your business.
• Keep those documents – you may need them if Revenue makes inquiries.
• If you find misclassifications, think about making a disclosure under the Revenue guidance.

How We Can Help

Revenue has made worker classification a clear focus. We help employers review contractor and locum arrangements, apply the Karshan test, and resolve issues through Revenue’s disclosure process.

Get in touch to ensure your business is compliant and protected.

-Lisa