Working from home, contracting for a UK company

backhome

Hi All,

This is my first post on boards.ie!

I'm hoping someone can help me find the information I need.. I haven't been able to find any relevant information so far on www.revenue.ie or forums.

A UK company is considering offering me a direct contract to work from home and I have to discuss a daily rate with them subject to approval for the contract.

I am very confused how this would work from a tax point of view. Looking on this and similar forums it seems like I would have to set up as a limited company or sole trader and charge VAT. Is this correct?
If so how would I calculate what my take home pay would be? Would it be possible for me to claim back any tax on equipment I buy to complete the contract?
I need to know this to see if it would be worth my while taking the contract and leaving my current permanent position.

Also would it be possible to use an umbrella company in this situation? Are they good to work with? Do they cost a lot?

Thanks,
backhome

Goreygal

Hi

I am in the same situation - I work for a UK company on UK contracts but am based in RoI after they allowed me to relocate home.

Basically there is an agreement between UK & Ireland (and other EC member states) that you only have to pay tax in the country of residence. Hypotax (hypothetical tax) is taken from my UK salary every month and then via PWC my tax bill is paid to Inland Revenue when due. PWC also deal with HMRC on my behalf also and have a website that I upload relevant documents, receipts too. Basically i upload everything and let them sort it out You can also claim tax relief on certain household bills such as electricty for your home office e..g if your house has 5 habitallrooms of which one is your office you can claim 1/5 of your electricity bill as an expense.

It is a really complicated area of tax so you would need to liase with tax specialist who has experience in cross border taxation as you have to prove/declare your working days here and in UK (e.g. meetings etc). You will need to figure the cost of tax consultantcy into your fees.


Good luck

Gg

derand

The hypo tax scenario outlined applies mainly to executives seconded to work in jurisdictions other than the country of main residence. The main purpose of this structure is to ensure that the individual is no worse off having to work abroad taking into account travelling costs, etc and differences in PAYE and social welfare.

The scenario outlined is, I think, different insofar as you are being engaged by this company for the first time. However, as the previous person has said the area is complex from a tax perspective.

The first issue to consider is the capacity in which you will operate, i.e. whether you will be an employee or engaged as a professional advisor/constractor. Your question implies that you are looking at the latter.

Whether someone should incorporate or carry on as a sole trader is a question that needs to be considered on a case by case basis. Some of the factors to be taken into account include:

1. If you're level of drawings (i.e. income) will be less than your profit. If not, incorporation will not yield any TAX benefit. If there is a differential then incorporation can be used to save income tax.

2. Pension planning - perhaps not an issue up front but there are more flexible & greater pension opportunities by using a company.

3. Tax-free income - currently a new company which commences a new trade is exempt from corporation tax. This will enable you earn income in the company tax free and is a benefit if you need to reinvest in the business - i.e. enables access to cheaper funding.

4. Limited liability - using a company is a good way of protecting your personal assets from risk attaching to you business activities, i.e. useful if giving professional advice or providing a service where there is potential for being sued - bear in mind that you would/should have professional indemnity insurance in this case.

If you incorporate - you will take income out of the business by way of salary. The company must register for and operate PAYE on your salary. There are benefits to this. If you operate as a sole trader, you will be assessed to income tax on your earnings irrespective of whether you actually access the profit for personal use. Either way you will be chargeable to income tax and will be obliged to file an annual tax return.

If you incorporate the company will be required to file an annual tax return also and to file accounts with the CRO each year. In all probability the accounts will not require an audit meaning that a simple, and cost effective, set of accounts will suffice.

Either way, you will be entitled to tax relief for business expenses. Operating costs, such as light, heating, rent, stationary, broadband, etc., etc., can be deducted in full in the year incurred. However, expenditure of equipment may only be allowed over 8 years if purchased outright. If leased/hire purchase expenditure will be allowed in line with repayments but beware finance leases as these are not always tax efficient.

If you are providing a professional service the likelihood is that your service will be VATable, i.e. chargeable to Irish VAT at 21%. However, without going into detail, you would probably be entitled to "zero rate" your invoices - which means charging VAT at 0% - provided that you have been provided with a UK VAT number by the UK company and that certain other conditions are met. If this is the case you would be entitled to recover VAT on your business related costs but would not actually charge VAT on your "supplies".

There are other issues to consider but I would need to know more about your circumstances and what you are intending to do. For instance, if you are operating in a sales capacity in Ireland for the UK company your actions could bring that company within the charge to Irish corporation tax. This is not an issue for you per se, but I mention it only to highlight the scope of some of the issues worth considering.

I could go on...suffice to say there is a lot to consider. I would be happy to have a chat offline about this if you would like to pm me.

Derek

Goreygal

Cheers derand for clarifying my reply... as i said I know it is complicated and PWC do all my paperwork.

Gg

Malcor73

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Malcor73

Hi folks, hope you can help clarify my situation!

Starting with UK company as their Irish sales rep next month. Will be working from home office, have agreed a base salary, and they are providing a company car. As I've always been a PAYE employee of Irish companies I never gave tax a second thought, just presumed it would be looked after by my new employer. They've just informed me that they will be paying me a gross salary and I have to look after my own tax affairs, and I don't know where to start.

It's a permanent salaried position, so it's not a contract-type employment. I'm not self-employed, and I'm not a director/consultant. The long term plan is to open an Irish office but this could be 2/3/4 years off.

What are the pros/cons to this arrangement? Can I claim expenses such as electricity/broadband/phone for home office? Do I pay less PRSI? And does this then raise issues if job doesn't work out re dole?

Any help/advice would be greatly appreciated!

M.