Am I Unemployed or Self-employed?

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Bri Cualann

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Hello

Although I am unemployed, the Revenue Commissioners have decided that I am self-employed. Details as follows.

I am a 52 year old, single man living in my own house and have been unemployed since being let go by the company for which I worked in 2006. I am available for, and actively seeking, work, and registered as such with the Department of Social Protection. I receive no job-seeker's allowance from the department, being disqualified due to the extent of my savings (a six figure sum). I am living off the capital of those savings, the interest they generate and the very occasional capital gain I make. Most of my money (93%) is in bank deposits with the rest being in shares (4%) and investment funds (3%).

Despite the fact that I do no work, have no business, provide no goods or services, receive no wage, etc, the Revenue Commissioners class me as "self-employed" and tax me as such. This implies that I and every unemployed person forced to live off our nest-eggs is self-employed, which seems ridiculous. Do I have grounds to appeal their classification of me?

Thanks for any help

Bri Cualann
 
Hi Bri Cualann,

below is from revenue website, may answer your question

Self-Assessment applies for Income Tax purposes to:

  • Self-employed persons (i.e. people carrying on their own business including farming, professions or vocations)
  • Persons receiving income from sources where some or all of the tax cannot be collected under the PAYE system, for example:
    • profits from rents,
    • investment income,
    • foreign income and foreign pensions,
    • maintenance payments made to separated persons or where civil partnerships are dissolved,
    • fees and other income not subject to the PAYE system,
    • profit arising on exercising various Share Options/Share Incentives.
 
Are you saying you are a chargable person required to file a tax return or that you are self employed? You can't be self employed if you don't conduct a trade!
 
Bri Cualann said:
Hello

I receive no job-seeker's allowance from the department, being disqualified due to the extent of my savings (a six figure sum).

I am living off the capital of those savings, the interest they generate and the very occasional capital gain I make. - Capital Gain Tax, Capital Aquisition Tax or DIRT may be applicable

Most of my money (93%) is in bank deposits with the rest being in shares (4%) and investment funds (3%). again you are making a gain which is not taxable under PAYE system therefore it should be declared on a Form 12 I think it is, (used to be, maybe renamed) Form 11 relates to self-employed which you are not



Thanks for any help

Bri Cualann
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If you are in doubt you should ring or call into a Revenue office to clear it up but as a general rule if you make a Gain the taxman wants his cut ;)
 
I'd be interested in answers to the OP, having just landed in the same situation myself. One important distinction that must be made is that there is a difference between self-assessed and self-employed. I have been self assessed for years, at Revenue's insistence, even since declaring a capital gain in one year on an investment made to raise funds for a charity. I am not and never have been self-employed. I have made claims for relief on charitable donations available only under self assessment, but not to PAYE workers (even though that's what I was, except for Revenue's insistence that I self-assess).

Since a few months ago, I'm in a similar boat to the OP, not employed (but in my case not seeking employment). One thing I've been wondering is whether I'll get hit for the 4% PRSI on deposit interest in 2013 as "self-employed". (I realise everyone pays it from 2014 on).

OP -- are you definitely classed as "self employed" and not just self-assessed? For instance, do you have to pay PRSI on your deposit income? (You've probably noticed, as I have, that the new rate of DIRT+PRSI is now quite a bit more expensive than if it was taxed the same as income from employment where you would have tax credits and tiered rates).
 
Thanks, everyone, for your responses.

To answer the questions raised:

When I worked I was a PAYE worker but was also chargable/self-assessed (i.e. sent in tax returns to Revenue (Form 11 I think)) I suppose because I made the odd capital gain on shares. Now that I am unemployed I still send in a tax return (so still self-assessed) and am also (definitely) classed by Revenue as self-employed. Therefore I have been paying 4% PRSI (on top of DIRT) on the interest from my deposit accounts. In 2013 the self-employed will have to pay a minimum of E500 PRSI, thus doubling PRSI for me.

I can't object to paying CGT but I should not have to pay the PRSI if I'm not self-employed. Just to confirm: I do no work, have no business/trade/
profession/vocation, own no company, receive no wage, etc. I venture into the stock market a few times a year (usually with unfortunate consequences) but this hardly makes me a professional investor, merely an ordinary share-owning citizen.

Bri Cualann.
 
Surely you are just self-assessed and not in receipt of JSA? To be in receipt of JSA or JSB you have to be actively seeking work (according to the rules).

Off topic, but I really can't understand how someone can have been unemployed since 2006 unless it was by choice or there were medical reasons. We had full employment between 2006-2008 for those that actually wanted to work and not live off benefits.
 
There are many people in this situation now living off unexpected redundancy payments, not making any claims on the State who now following recent budget changes will see their income from savings interest drop further, there is nothing wrong with living this way,it is simply a lifestyle choice.
 
When the time comes to make a claim on the SW, the SW will make it all out to be wrong.
 
Bri Cualann said:
Thanks, everyone, for your responses.

...Therefore I have been paying 4% PRSI (on top of DIRT) on the interest from my deposit accounts. In 2013 the self-employed will have to pay a minimum of E500 PRSI, thus doubling PRSI for me... Bri Cualann.
Click to expand...

Does the PRSI on deposit income count towards the minimum PRSI contribution, or is it separate/in addition?
 
OP, another question -- if you registered with DSP do you not get to sign on for PRSI credits, even if you get no payment? Does that not make you unemployed rather than self-employed? There must be tens of thousands of people out of work for over a year -- I can't believe Revenue treats them all as self-employed.
 
dub_nerd said:
Does the PRSI on deposit income count towards the minimum PRSI contribution, or is it separate/in addition?
Click to expand...

It is an interesting question, my view would be that it must but we'll all have to wait and see.

The situation now is that you must be registered with the Department for making voluntary contributions which the O.P mentioned is minimum €500 for 2013 but of course this amount is based on which class of PRSI an individual last paid, there is much about this in other posts.

Once you make voluntary contributions you are making a paid contribution so S.W. can never grumble, in any event it is a good idea to request your individual history from the Department and keep this updated periodically.
 
But I suppose the point is I presume the OP is signing for credits as he says he is registered as looking for work, this is preserving his prsi contribution record for future social welfare benefits such as pension without any cost to him so why should he have to pay €500 per annum as a voluntary contributor if not actually self employed.
 
To answer the new questions:

I (the "OP") am actively seeking work, not in receipt of JSA/JSB and am signing on for PRSI credits.

From 2013 the self-employed will pay PRSI of (a) 4% of income or (b) E500, whichever is the higher.

I certainly get the feeling from this thread that the Revenue were chancing their arm when they classed me as self-employed so I will challenge them and post the result here (a process that will, no doubt, take some time.)

Thanks again.

Bri Cualann
 
Bri Cualann said:
When I worked I was a PAYE worker but was also chargable/self-assessed (i.e. sent in tax returns to Revenue (Form 11 I think)) I suppose because I made the odd capital gain on shares.
Click to expand...

You sent in Form 11, so Revenue continue to send them to you. While you had employment income you would not have been charged PRSI as a result of the exemption to people you pay class A PRSI.

Now when you file form 11 you don't get the exemption for class A as you don't have employment income. So if you have income of more than €5,000 in a year then the class S minimum is due.

When you were employed you should have filed a form 12. You should enquire of Revenue if you deregistered from tax and filed form 12 from now on, there is not facility to charge PRSI on a form 12.
 
Joe_90 said:
You sent in Form 11, so Revenue continue to send them to you. While you had employment income you would not have been charged PRSI as a result of the exemption to people you pay class A PRSI.

Now when you file form 11 you don't get the exemption for class A as you don't have employment income. So if you have income of more than €5,000 in a year then the class S minimum is due.

When you were employed you should have filed a form 12. You should enquire of Revenue if you deregistered from tax and filed form 12 from now on, there is not facility to charge PRSI on a form 12.
Click to expand...

I'm not sure I get that. I'm in a similar situation to the OP. I filled in a Form 11 once, because I had a gain that could not be declared any other way. After that, Revenue required me to file a Form 11 each year. Does that make me self-employed now that I am unemployed? Can I stop being self-employed? (Not that I will likely bother, since the only material difference was the 4% PRSI on deposits which will kick in for everyone next year, although it's still not clear how PAYE people will make a return).
 
dub_nerd said:
I'm not sure I get that. I'm in a similar situation to the OP. I filled in a Form 11 once, because I had a gain that could not be declared any other way. After that, Revenue required me to file a Form 11 each year. Does that make me self-employed now that I am unemployed? Can I stop being self-employed? (Not that I will likely bother, since the only material difference was the 4% PRSI on deposits which will kick in for everyone next year, although it's still not clear how PAYE people will make a return).
Click to expand...

Stop.

You're making this more complicated than it is - this self-employed vs unemployed thing is a red herring - for tax purposes you are either a chargeable person or not, end of.

You can be unemployed, but in receipt of substantial investment income from dividends, interest or rents which make you a chargeable person. It doesn't mean you are "self-employed" unless you find that label convenient for yourself, but I would reckon most people consider self employed to mean carrying on a business/trade/profession.

Read this and decide what you are: [broken link removed]

If you are not a chargeable person then you are entitled to tell Revenue as much, and as the system is self-assessment you simply don't file, or you file a Form 12 if you need to declare income as a person other than a chargeable person.
 
Bri Cualann said:
To answer the new questions:

I (the "OP") am actively seeking work, not in receipt of JSA/JSB and am signing on for PRSI credits.

From 2013 the self-employed will pay PRSI of (a) 4% of income or (b) E500, whichever is the higher.

I certainly get the feeling from this thread that the Revenue were chancing their arm when they classed me as self-employed so I will challenge them and post the result here (a process that will, no doubt, take some time.)

Thanks again.

Bri Cualann
Click to expand...

See my post & link above re definition of a chargeable person - if you have income from interest & dividends in excess of 3,174 then you are a chargeable person. You said your capital is a 6-figure sum so this is likely to be the case.

So you can save yourself some time and correspondence by wrapping your head around the distinction between a self-employed person and a chargeable person - (almost) all self-employed people are chargeable persons, but not all chargeable persons are self-employed...
 
mandelbrot said:
Stop.

You're making this more complicated than it is - this self-employed vs unemployed thing is a red herring - for tax purposes you are either a chargeable person or not, end of.
Click to expand...


With respect, it's Revenue/DSP making it more complicated. I knew about the definition of a chargeable person. What I didn't know was that chargeable people who are not also PAYE workers pay class S ( - S for Self-Employed!) PRSI contributions.
 
Sunday Paper's Response

Hello,
As well as posting my query here, I (the OP) also send it to the money advice section of a Sunday broadsheet. They printed their answer today which I have reproduced below. (To summarise my complaint: I am unemployed but am being treated by the revenue as self-employed and must therefore cough up 4% (as PRSI) of any bank deposit interest I earn.)

What the paper said:

"You are being treated as self-employed by default because you are not in employment, This exposes you to an anomaly in the tax system, whereby the self-employed must pay PRSI on deposit interest, dividends and other unearned income but not those in employment.

I doubt that you have grounds for appeal because the government's solution for addressing this anomaly is to impose PRSI on all unearned income,including that of employees, from 2014.

The taxation of deposit interest is unfair for those on lower incomes. Dirt is deducted by the banks at a flat rate of 33% - great for those in the top tax bracket but not for those who pay at 20% or are exempt from income tax because their earnings are too low."

[End of what the paper said.]

The above response is quite a disappointment to me, I find the first sentence extroardinary and demanding of a proper explanation. I find the second paragraph illogical - can I not claim a tax rebate for PRSI wrongfully paid up till now and can I not avoid paying the new minimum self-employed PRSI of E500 from 2013 onwards? Then the third paragraph wanders off onto an irrelevant (though related) issue.

I will certainly be appealing my employment status to the revenue, despite the paper's pessimism in this regard, and will let you know what happens.

Bri Cualann
 
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