New to contracting!

124124

Folks,

I don't know if this is the right place to ask, but, does any one know how to go about billing when you do independent contracting with a IT firm?

AFAIK, there are four different options to go about it.

a) Issue invoices myself, and take care of my own account, PRSI, PAYE etc. In this case I need to register as a company, and maintain records

b) same as above, but wont have to register as a company if my income is less than €25,000 per year.

c) Let an umbrella company take care of billing for me and let them put me on their rolls and pay me salary and limited benefits

d) Let the firm to which I am contracting put me in their rolls.

well, one more option

e) go with an overseas umbrella setup and get paid elsewhere (avoiding higher rate of tax in Ireland)


Now, I am absolutely lost here. What would you reccoment and why? Or if you have done any of these before, what are the *fineprints* and benefits from your experience?

Thanks in advance,

124.

marrakesh

Suggest a).

b not an option as no point in contracting if earning less than 25K.

C) Crap no tax advantage when recieving monies from customers. You get all the money out straight into your own personal bank account which is not a great idea.. 42% tax rate no thx.

Using a) is easy enough to write off tax on expenses training etc . Pay urself a wage to keep on the 20 % tax band think that works our at around €1600 into your account in cash a month.

Charge VAT and whatever you do ALWAYS have your returns in on time. This has to be done every 2 months so probably best to get a bookkeeper to do it.

You will get the cash out of the company no worries what goes in must come out. Read a few accountancy books as accountants dont like to tell you about some of the trick's as they like there nice 'clean' image. Remember u pay them to sign off on the books and accountants are two a penny out there. To avoid an audit get books always in on time this wont avoid it but late books increase chances by 50%. If business grows to over 300k a year u will have to perform ur own audit check with the revenue on this. They will setup a meeting to meet with Zachias when u register a business use it to get as much info as possible. Have to pay corporation tax at the end of the year on profit's im sure you can make the company look very unprofitable if needs be.

d) 42% no thanks.

e) nice but is it practical ?

124124

marrakesh, thanks a million!

Now, thinking inline with your suggestion, how much would it cost (money and time) to setup a company and to run the show?

I am only temporarily into contracting (because my prev. employer closed down their Irish operations, everyone was laid off, etc).

I intend to do contracting only for another six months or so (expecting to find a good permanent offer in that period) and hence, in six months I may not make more than >25000.

Now, I was paying normal tax contribution (42% or what ever) at prev. work till July end, and now thinking of doing this billing on my own. In next 5 months (till end of 2003) I wouldn't bill more than €25K. So can I get away with out registering a company?

And about Option e, yeah, its practical at least in my case, as I am a non-national. I can arrange to get it paid in my country of origin with a dodgy international umbrella set-up, but honestly, I do not want to do it. I think its kinda cheating!

Anyhow, I think I better pay a visit to my tax office and get some real advice!

Suggestions are welcome!! Thanks in advance!!

124.

marrakesh

To setup a company costs 60 bucks plus €1 as a share u need the following form stamped by a solicitor to say u are resident in ireland use the guy beside the CRO office as he charges a €5 for it and is a raging alcoholic. €66 so far.

http://www.cro.ie/forms/word/A1new.doc

U need then to submit the form above and your articles and memerandum of association a trip to either local library or a google should help u with this.

You need to download a Paye / Prsi form for setting up taxes and getting a PRSI number as an employer www.revenue.ie or pop into them on o connel street.

Then you need to register for VAT ask in revenue if u drop into them or goto revenue.ie the form should be downloadable.

VAT registration takes 3 weeks then u can charge VAT. If i had the chance id be setup in russia paying 13% tax and everyone would be happy. I may have to get one of my russian mates to setup a company over there and help out. If your thinking of been based in england froget about it as irish and english tax systems are interlinked.

If the company u are contracting wants to get ur VAT number then you will need to be setup in Ireland i read about the 25 K rule but its on me laptop at home and not at work.

Leave the money in the company and use a company credit card and u can claim and computer items , travel, clothes u name it back against the VAT u send the revenue every 2 months or so.

U can register as a sole trader which may be a more practical idea in your case unless your in the contracting end for the long haul. Less paper work but not as much tax avoidance. You will need to setup company bank accounts etc aswell..

This link has all info u need for revenue items.. :
http://www.revenue.ie/faqs/busnes.htm

124124

Thanks for the detailed input, marrakesh! Appreciated!

I had a chat with local revenue office, and according to them I dont necessarily have to register for VAT or start a company -- at least, not yet! I guess they were suggesting me the 'sole trader' option that you mentioned, which is, invoice my client firm myself, and keep the records (books) and pay tax at the end of the year (kind lady at revenue offered to help with all that at the end of the year).

I am still not sure which one to take. I would probably go for this sole trader option, as I dont intend to do contracting for long. Also, its convenient to switch over to other modes, like going with an overseas setup, which is practical in my case (I already know someone who already have the setup running)

Thanks again!

124.

thehopper

Hi 124124

Can I ask you what sort of IT work you are into?

124124

I just PM'd you 'hopper'.

casper-

Hmm..shame i missed this thread before my previous post Anyway, I noticed you mentioned

e) go with an overseas umbrella setup and get paid elsewhere (avoiding higher rate of tax in Ireland)

and then got

e) nice but is it practical ?

I'm kinda curious as to what advantages that might give marrakesh. I've got a corporation registered now in Canada, corporate tax is pretty much the same as yours (~12%), and personal tax is only slightly less. We pull the same stuff you mentioned (i.e. leave everything in the company, pay yourself just enough to stay in the lower tax bracket). Of course I'm not at all familiar with the tax situations in various EU countries - did you have a particular setup in mind?

Btw, i'm IT contractor too (well software developer..win/mac blah blah blah) - maybe we could join forces

marrakesh

Hi jedidjab79,

If i was to have a company in russia i would have a tax rate that is 14% for every living creature based in russia. So instead of paying 22% at the lower tax bracket i would only be paying 14%. This is just a sample instance...

However if i have a company setup in a different country what i may be able to do is to pay no tax in the country (russia for instance sake) where the money is coming in as i am essentially not living there so once you are not a resident of a state you will not need to pay tax where the money is coming in from. Thereby one would only need to pay corporation tax only for the company which would be 12% but ur actual income band would not be taxed. You can probably see the benefits of this $$. There is probably a cap on how much you can earn but this is possible to do if not resident in a state where ordinarly one would pay tax..

If you are based in canade then you should have a loop hole for not been a resident there when paying tax on your personal income. It exists in irish tax law which is fairly similiar to other tax regimes (except for russia..!!)

Hope that makes sense..

Good to see that there are lots of contractors out there >>>

casper-

Ahh i see what you mean. However, if I stayed incorporated in Canada then there's a lot of rigmarole i'd have to go through -- somehow getting all my bank accounts mailed to ireland, and then mailing in my remittance cheques every month back to CCRA. Not to mention having to ship over my papers at year end for the accountant and on and on and on ....

It might be save me cash in the end, but I'm not *that* energetic

marrakesh

Thats why i said is it practical ? (in my own little sarcastic manner..)


Thing is there are companies who will do all the dog work for you. Mail forwarding aint that hard to setup costs 10 sterling in england for a year.

Myself legit in this country ..

casper-

Originally posted by marrakesh
Thing is there are companies who will do all the dog work for you. Mail forwarding aint that hard to setup costs 10 sterling in england for a year.

[/B]

Wow that's cheap. It's 300CAD for 6 months to do forwarding outside Canada. I'm just gonna do the simple (safe?) thing and just register a private limited company in ireland. Now I have to come up with a name ... that always takes forever heh.