2026 employment tax compliance: Key risk areas and deadlines

Since the introduction of real-time reporting for PAYE, and more recently Enhanced Reporting Requirements (ERR), the employment tax compliance environment has changed significantly. Revenue now has access to vast amounts of employer data on a real-time basis, allowing immediate identification of discrepancies. This access to comprehensive compliance data is driving a marked increase in Level 1 and Level 2 compliance interventions and audit activity across employment tax.

This article sets out key employment tax topics, upcoming compliance deadlines, and high-risk areas we commonly identify during PAYE reviews and when supporting clients with employment tax matters. These represent a sample of topical areas rather than an exhaustive list – areas most likely to trigger Revenue compliance attention if compliance requirements are not met from the outset.

Key employment tax risk areas

Revenue is particularly focused on the following.

Contractor misclassification

Following the Supreme Court’s landmark judgment in Revenue Commissioners v Karshan (Midlands) Ltd t/a Domino’s Pizza, the settlement window closes on 30 January 2026. This applies to any workers currently classified as self-employed who may be deemed employees under the Karshan tests during 2024 and 2025. Employers who fail to take this opportunity will face full gross-up provisions, potentially tripling costs, with interest and penalties up to 100% of tax.

Directors’ fees and PAYE compliance

Revenue takes a strict approach to office holders. A critical principle is that income arising from holding a directorship of an Irish company is always subject to Irish PAYE, regardless of where the director is resident or where fees are actually paid. Requesting that fees be paid to a company does not remove the obligation to operate Irish PAYE. A common issue we see is where directorship remuneration is paid through invoice arrangements rather than through PAYE. Ensuring PAYE is correctly operated and appropriate PRSI classification applied is essential. These areas frequently trigger audit attention.

Salary sacrifice arrangements

A salary sacrifice arrangement is where an employee forgoes part of their salary in exchange for a non-cash benefit. Only certain approved salary sacrifice arrangements are permissible – such as bike-to-work schemes, APSS, and approved transport passes. Beyond these specific arrangements, this is an area where employers frequently encounter compliance issues. Appropriate professional advice is essential to ensure arrangements are compliant.

Company vehicles and benefits-in-kind

The application of BIK on employer-provided vehicles is a key area of Revenue focus, and costs associated with retrospective adjustments can quickly add up. We see costly settlements where BIK has been understated or calculated incorrectly over multiple years. The critical issue is record-keeping: monthly mileage logs are essential to support business vs private use calculations. Revenue typically review BIK calculations which differ from the standard rate in detail. Robust PAYE controls with adequate monthly record-keeping are paramount in this area.

Staff entertainment expenses

Staff entertainment expenses is a key area of Revenue focus. While company-wide occasions remain acceptable when genuinely inclusive and reasonable, Revenue increasingly challenges team outings, departmental events and farewell celebrations as taxable benefits. Even with proper documentation, Revenue may not accept the treatment.

Enhanced Reporting Requirements (ERR) and travel and subsistence reporting

Since January 2024, ERR requires real-time reporting of travel and subsistence reimbursements (whether vouched or unvouched), remote working allowances (€3.20 per day), and small benefits. Travel and subsistence claims represent an example of significant focus areas during ERR reviews. Based on our experience, where patterns emerge or anomalies or claims that appear misaligned with expected business activity are identified, Revenue may inquire further. If responses to such inquiries are not satisfactory, or where documentation to support claims cannot be produced, this can trigger Level 1 and Level 2 compliance interventions.

Shadow payroll arrangements and cross-border employment structures

Shadow payroll situations arise when employees work across multiple jurisdictions – for example, an employee based in Ireland but paid by a UK employer, or split working between Ireland and another country. The calculation of taxable income on Irish workdays, proper workday allocation methodology, and coordination between home and host country payroll systems require precision. Common errors we see include incorrect workday allocation methodology, incomplete documentation, and BIKs not being captured through Irish payroll, all of which create significant audit exposure. These arrangements demand detailed monthly reconciliation and clear audit trails.

SARP claims and ongoing eligibility

SARP (Special Assignee Relief Programme) provides substantial tax relief on qualifying assignments – 30% relief on salary for up to five years – but with strict compliance requirements. Revenue focuses heavily on eligibility verification and compliance monitoring. Assessment prior to coming to Ireland is important to ensure proper planning and that all eligibility criteria and conditions are clearly understood. If an application is found to be defective, Revenue can claw back the relief plus interest and penalties.

Professional subscriptions and memberships

While Revenue allows exemption where membership is a statutory requirement or indispensable condition of employment, Revenue’s interpretation is strict. Common issues include claiming multiple subscriptions when only one per employee per year qualifies and claiming general development memberships as exempt. This area creates significant audit exposure if incorrectly categorised.

Quick summary

Available concessions and reliefs

Alongside the compliance challenges above, several concessions and reliefs are available where conditions are met and compliance requirements are satisfied. The following are examples.

• Assignees new to Ireland: For example, temporary accommodation and relocation expense exemptions, SARP relief and other assignee-specific concessions, depending on conditions and proper documentation.
• Short-term business visitor exemptions: Employees visiting Ireland for limited periods may qualify for a payroll PAYE exemption depending on the number of days spent in Ireland and the relevant double taxation agreement.
• Share-based remuneration: Employer PRSI relief opportunities are available, although correct PRSI treatment requires careful consideration of the specific arrangement.
• Professional subscriptions: Qualifying subscriptions are genuinely exempt and worth defending where they apply.
• Small benefit exemption: Up to €1,500 per employee per annum for the first five non-cash benefits, subject to careful timing to maximise the exemption.
• Travel and expense policies: Well-documented policies demonstrate understanding of and compliance with legislation and relevant exemptions where they are applicable.

Why early advice matters

Early employment tax advice helps businesses identify their compliance obligations, understand which reliefs may be available, and ensure their arrangements comply with legislation and Revenue requirements.

If any of these areas are relevant to your business, it is worth having an expert eye on the compliance position.

Key upcoming dates

• 1 January 2026 – Ireland’s auto-enrolment pension scheme is now live
• 23 January – PAYE Settlement Agreement deadline
• 30 January – Contractor settlement window closes
• 23 February – SARP returns due
• 31 March – ESA and RSS1 share scheme returns due

For specialist advice on any of these areas, please contact our Employment Tax Advisory Services team. We provide guidance on Revenue audit defence, directors' compliance, ERR implementation, share scheme compliance, and cross-border employment arrangements. We also prepare clients for Revenue interventions and conduct proactive PAYE health checks to identify and prevent compliance issues before they escalate.

Contact us for a complimentary consultation on your employment tax compliance position.

Disclaimer: This article is provided for informational purposes only and does not constitute tax advice. The information contained herein is general in nature and based on current tax law and Revenue guidance as at the date of publication. Employment tax compliance is complex and highly dependent on individual circumstances. Professional tailored advice from a qualified tax advisor is essential before taking any action based on the information in this article. Crowe Ireland accepts no liability for any actions taken or decisions made based on this publication without obtaining specific professional advice.