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IT Contractor and VAT

  • 21-07-2010 9:16am
    #1
    TPane
    Closed Accounts Posts: 2 ✭


    Hey,

    I'm going into IT contracting fulltime as a sole trader, in a few weeks and i'm just trying to get my head around the whole income tax and VAT thing.

    So the way I understand it, I have to pay income tax regardless, so either 20% or 40% and also that annoying income levy/government incompetence tax.

    Now if I make more than €37,500 I have to pay VAT on my services? Do I charge VAT to my clients or do I take the hit and pay this?

    Can anyone clear this up for me?


Comments

  • #2
    jockey#1
    Registered Users, Registered Users 2 Posts: 317 ✭✭jockey#1


    TPane wrote: »
    Hey,

    I'm going into IT contracting fulltime as a sole trader, in a few weeks and i'm just trying to get my head around the whole income tax and VAT thing.

    So the way I understand it, I have to pay income tax regardless, so either 20% or 40% and also that annoying income levy/government incompetence tax.

    Now if I make more than €37,500 I have to pay VAT on my services? Do I charge VAT to my clients or do I take the hit and pay this?

    Can anyone clear this up for me?

    Income tax will either be @ 20% or 41%, don't forget PRSI!

    If you think your sales will be over €37,500 then you should register for VAT. You charge your clients 21% VAT you do not take the hit as such. By electing to register for VAT you can then in turn claim VAT back on your expenses such as mobile phone bills, diesel, equipment etc.


  • #3
    dbran
    Registered Users, Registered Users 2 Posts: 2,094 ✭✭✭dbran


    Hi

    As previously mentioned above re income tax.

    Regarding VAT, a lot will depend on whether or not you are supplying IT services mainly to vat registered persons. If you are they will not mind if you charge them VAT as they simply reclaim it back on their next VAT return.

    If you are dealing with Non Vat registered persons, then you may have to take the hit yourself as to increase your fee by 21% may mean you are uncompetitive against against other unregistered IT providers.

    Hope this helps

    dbran


  • #4
    Bigcheeze
    Closed Accounts Posts: 2,858 ✭✭✭Bigcheeze


    Depending on your circumstances you may want to set up a company. I know that I would be very reluctant hire a sole trader IT contractor on any long term or exclusive contract as Revenue rules means the liability is on my company if it is deemed you are effectively working for me as an employee.

    http://www.revenue.ie/en/tax/rct/determining-the-correct-employment-status-of-a-worker.html


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