PAYE Worker vs Director/Self Employed

-Chris-

I don't know if this has been asked before, but here it goes...


I've been approached to set up a small sales office for a UK company in ROI. I would either be self-employed, contracted to them as a consultant, or I'd set up an Irish company and be Sales Director with the other director being from the UK HQ.

I've been a PAYE employee in the private sector all my life and my wife is worried about the fact that there's no dole for self-employed people if this doesn't work out. Also it's good that my tax affairs are automatically looked after, that I don't have an accountant, that I'm never audited etc.

It seems there are definite pros to being a PAYE worker and just being a cog in the machine.


I presume there are also substantial benefits to being self-employed or a company director if you have to put up with the hassle of the things listed above. I hear about people being able to "write things off against tax" and so forth, but never fully understood what that means.


So, long story short (and presuming that all other things are equal - I have an equal choice between a PAYE and a self-employeed job, I have the temperament to look after the many aspects of being a director/self employed, I like strategy and big picture stuff so I'm not concerned with hiding within an organisation waiting for my pension) what are the pros and cons of PAYE vs self-employed/director? Why would I pursue one arrangement over the other?

dbran

Hi Chris

The benefits of having and "A" stamp although real can be overrated. It only gives you SW for a year at most after that it is means tested, you get subsidised dental work etc etc. You may get a designated salary at the end of the day, but as with self employed, if there is no work then you can still be made redundant.

As a self employed person you get to partake in the risks and rewards of the venture. You can write off a number of things to tax and you pay less PRSI.

So I guess it would depend on the security factor involved and your attitude to risk.

Just my 2c though


Dbran

-Chris-

Cheers dbran!

I have a healthy attitude to risk and I wouldn't be afraid to stand on my own two feet, but the missus is very risk averse and I'd need to have some form of "business case" to show her the risk is worth it and the trade-offs are fair.

What about running a car as a business expense? Are there other allowances or write offs for clothing or otherwise for self-employed people?
I'm not looking to evade tax, but I'd certainly want to work the system so as to be as tax efficient as possible.

Gloomtastic!

There's not much left to 'work the system' I'm afraid. They've clamped down on pretty much everything.
The directors in the UK, are they PAYE? I'd go the same way they are, whichever that is.

robinph

As the company director can you not just employ yourself as a PAYE employee to keep up with the PRSI?

goonup

Hi I am also a company director working as an employee of an umbrella company. I pay class s prsi. I was wondering if I could pay class a prsi instead of class s in order to keep my stamps up.

Thanks,
goonup

dbran

Robinph- If you are a proprietary director ie own more then 15% of the shares of the company, then you are termed as self employed and have to pay class S.

Goonup- As a director of an umbrella company I presume you do not have any shares on the company. In that case you are on the wrong PRSI class and it should be class A. if you have more then 15% then it is class S.

You cannot pick the PRSI class you are on as it is determined by facts.

Hope this helps

dbran

voxpop

I use to be paye - been self-employed for the last 2 years.

The down sides as I see it are - no social welfare, no paid holiday/sick days, no redundancy (if you are about long enough), You dont get the prsi tax credit, having to do your end of year tax (or pay someone to do it for you), harder to get loans from the bank.

The benefits - you should be paid a bit more, you can write off a bit (not as much as you think), thats about it.

Beasty

You need to consider VAT also. If you are a consultant, and not personally contracting with the customers, this should be an issue for the UK company - they will have to register for Irish VAT if sales are above a certain level (around €35k pa IIRC), but can apply UK VAT if below the thresshold, or zero if supplying to VAT registered businesses

If you set up an Irish company, it's the comapny that has to register for VAT if appropriate (ie if enough VATable sales are made)

(The other advantage of being a director of an Irish company and subject to Irish PAYE, which I know you will appreciate, is that you could set up your own Bike to Work scheme:))

byrne0f56789

Write offs only relate to business expenses. Be away of benefit in kind taxes etc.

Generally, if you are worrying about security issues then you need to focus on the viability of the venture.

As was mentioned earlier if you are a non-proprietary director then there isn't an issue.