The above titled Bill was published at the end of last month and provides for a number of changes to the Social welfare code. Included are provisions affecting the PRSI status of employees where they have either the beneficial ownership of their employing company, or have direct or indirect control of 50% or more of the ordinary share capital.

According to the Explanatory Memorandum:

“Section 12 provides that a working director with a shareholding of 50% or more in a company will not be regarded as being insurable as an employed contributor in the company. Company directors holding 50% or more of the shareholding of a company are not normally regarded as falling within a normal employer/employee relationship and are therefore, deemed not to be employed under a contract of service and liable for PRSI Class A contributions (as an employee). Instead, such company directors are deemed to be employed under a contract for services and to be liable for PRSI Class S contributions (as a self-employed person).”

The Bill also includes provision for implementation of the announcement in Budget 2013 to broaden the PRSI base by extending liability for PRSI contributions to modified rate contributors who have income from a trade or profession.

Chartered Accountants Ireland met with representatives from the Department of Social Protection to discuss provisions of the above titled Bill affecting the PRSI status of employees where they have either the beneficial ownership of their employing company, or have direct or indirect control of 50% or more of the ordinary share capital. It seems that it is intended in the case of “working directors” (a 50% plus shareholding and where there is a contract of employment), Class S will automatically apply. Practically this means that where the shareholding is less than 50% the relevant Class i.e. A or S, will be determined by Scope Section in the Department of Social Protection based on the Code of Practice and the facts of each case. We also understand that the Department of Social Protection is considering publishing guidance on the tests that will be applied when determining the PRSI status of working directors. Chartered Accountants Ireland will be engaging with the department on development of this guidance.

The Bill is expected to pass through the Oireachtas mid-June and is due to be enacted by early July.

Discussions and correspondence between Chartered Accountants Ireland and the Department of Social Protection are on-going. Any further clarifications or explanations will be covered in tax.point as they are confirmed to us.