There has been a lot of concern expressed by the freelance editing community, and other cohorts in the film, TV and media sectors, about the guidelines determining employment status for tax purposes issued by the Revenue’s last May. In a nutshell, Revenue has created a series of criteria for self employed workers which will bring a greater number of them into the PAYE tax system as distinct from invoicing under Schedule D. Yes, self-employed people can be on PAYE, not a widely known fact.

The Revenue’s guidelines can be downloaded here and you can also download a summary created by Screen Guilds Ireland here. Another useful document is the Code of Practice to Determine Emplyment Status which can be downloaded from its gov.ie webpage. It is worthwhile studying these documents, particularly sections 1, 2, 3 and 4.2.5 of Revenue’s document. Examples are given of scenarios illustrating the circumstances where it is mandatory to be under the PAYE system and where invoicing under Schedule D can apply.

If an editor or assistant editor trades using their own personal services company, i.e. a partnership or a limited company, then they will not have to be taxed under PAYE, they will be trading under their business name and can issue invoices for their services. This also applies to individuals who have their invoicing done by their agents. There is anecdotal evidence that some production companies take a flexible view and don’t insist on going on to the PAYE system if, for example, an editor or assistant editor supplies their own equipment, works from their own premises/home and/or works non prescribed hours. However this latter point is a grey area so each project will have to be negotiated separately.

One advantage of being on PAYE is that an individual can gain credits that will go towards social welfare, e.g. jobseeker’s allowance. Another is that holiday pay is automatically included at around 8% on top of the rate, something which freelancers have missed out on a lot under the Schedule D system. It is available if you ask for it when invoicing but a lot of freelancers don’t realise this or don’t want to rock the boat by demanding holiday pay. Our advice is to make sure holiday pay is added in all scenarios. Another advantage is that the size of the year-end tax bill in the following November, is reduced or even eliminated, along with the preliminary tax that’s added on account for the following year. One disadvantage is the possible reduction in claimed expenses but one can claim for heat, electricity, refuse and insurance if working from home as well as mileage and accommodation if working far from home under PAYE.

Setting up partnerships or limited companies is straightforward and not subject to minimum income limits. As these entities require a minimum of two roles (partners in a partnership and director & company secretary in a limited company), you will have to have the cooperation of another person to set up such an entity even though they will usually have a minority or token role in the business. This other person is generally the freelancer’s significant other, relative or close friend. Accountancy costs are higher, particularly for a limited company, but these can be offset by paying oneself as a PAYE employee and paying corporation tax on the profit after deducting one’s salary.

ISE recommends that our members consult their accountant and/or financial advisor to determine the best course of action for them under the new guidelines, remembering that there are no bad options, only a different set of trading circumstances to those most people have become accustomed to. ISE also recommends contacting the Revenue Commissioners directly, they are very helpful and they have a very good reputation for clear, helpful and unbiased advice. We will update this item as more information comes to light.