PAYE / Sole Trader / Ltd conundrum...

divot

Hi all, hoping someone in *this* forum can help out! (There seems to be no correct place to ask this question)

I may (not through choice) be no longer working for my current multinational company in Ireland (been with them for years), and I'm consequently considering jumping to work for a US company that has no European presence. I'm wondering *how* to actually go about that - I could get them to pay me gross, but then if I become a Sole Trader, I seem to pay PRSI "S" band only, which means if it goes wrong somewhere down the line, I'm not entitled to jobseekers benefit at all, despite my years of full PRSI contributions.

I should emphasise that I don't want jobseekers anything - but if I'm going to strike out in a new direction working, I'd just like to retain my entitlement to it should it all go horribly wrong. Mortgage, kids, etc. So what I'm wondering is, is there a way that I can be paid by a non-Europe company, and still make full PRSI contributions as normal?

Is there a way for a US company to outsource payroll and PRSI payments to someone over here? Or could I form a limited company which pays all my PRSI, and just invoice the actual employer gross all salary, tax and PRSI costs, thus retaining full stamp payments?

Someone must have an answer to this...

ssbob

Hi Divot,

I would advise you to speak to your accountant but if I was you I would think it would be more tax beneficial "currently" to become a sole trader. Even though you wouldn't be entitled to Job Seekers benefit, you should be entitled to Job seekers allowance based on a means test.

I think if you register as a ltd compnay, the same applies for you as you will be the owner of the company.

I am sure this US Multinational could set up a branch in Ireland if they are doing business here, you could run the branch but it may involve them having to do accounts for that branch to be taxed here.

Hope this helps.

Bob

divot

Hi SSBob,

This is the issue - my wife earns - neither of us hugely, and we have a large mortgage (which we aren't complaining about - fully intend to pay off etc). But we need both wages to do so. The issue with sole tradership is that it would I understand discount me from Jobseekers Benefit, and the means test against my wife's wages would probably mean that I wouldn't get jobseekers allowance either. In other words, the system is structured to incentivise me to not strike out on my own and try to continue earning, but rather to sit back, hope for redundancy, and then collect my jobseekers benefit while doing nothing. That's not what I want, but the risk is loaded on to me the minute I become a sole trader, so with a big mortgage and a small child, where is the incentive...

So... the question is, is there another way around this to maintain full PRSI contributions etc without becoming a sole trader?

The US company sell to distributors in Europe, so there is no reason for them to set up a full "branch" in Ireland with accounting etc unless it's nearly cost and maintainance-free. All I'm looking for is a way for them to pay and employ me, while I maintain full PAYE, PRSI and soc-security payments in order to protect my entitlements just in case... surely there has to be a way?!

ssbob

Hey Divot,

On the department of Social Welfares website, they say "if you have paid Class A PRSI within the last four years then you may have enough credits to entitle you to Jobseekers Benefit".

If you have been fully up to date with your PRSI, then I would suspect you would have enough credits for at least the next two years.

I have an e-mail also to a friend who is going to let me know is it possible to keep paying Class A even if you should be paying Class S?

Bob.

ssbob

Just following up on this, my friend came back to me and said that you can make voluntary contributions to retain your entitlement to the state pension however as a sole trader it is definitely not possible to retain your entitlement to job seekers benefit.

I would think that based on your means which is your earnings less your outgoings you should still be entitled to job seekers allowance even if your wife is earning, what you consider is net take home pay of your wife and not gross, you would also be entitled to a mortgage interest supplement on your mortgage for at least 6 months and possibly 12 months.

If I were you, be positive, register as a sole trader, you will invariably have more money coming in than before as your tax liability should be lower(assuming your contract fee will be the same as your salary was), with this extra money, you should increase your payments on your mortgage which would reduce dramatically the the term left on the mortgage, if a rainy day does happen then at least you will be ahead of your originally agreed payments schedule: Use this link as an example:

http://www.itsyourmoney.ie/iym/extrarepaymentscalculator

If you want to PM me some details I could also help you out with working out how much you will be earning etc.

Hope this helps

Bob

paul71

Quick suggestion op, try find 2 other people in similiar situation and from a limited liability company with shareholding divided 3 ways, each of you invoice to your own earnings and draw salaries in accordance which your invoiced earnings, as you would hold less than 50% of shareholding each you would not be classed priprorty directors and would make contributions at A class.

divot

Thanks both SSBob and Paul71...

It looks like there is no straightforward way, like you say I'd possibly be protected a bit for a year or two, but it's a bit of a stupid disincentive - I'd be totally happy to pay full-whack tax and PRSI to keep on my entitlements just in case, and they'd be getting more money from me in the process!!

I'll have a think, see what way I go! Thanks again

Mr Clonfadda

Director with 25% or more Shareholding is classed as self employed.

Your PRSI contributions are based on the last five years contributions (aged over 25) so you would get a year before this would be an issue.

Don't go into a business with the attitude that your going to fail or you may fail. You've gotta to be positive.

divot

Thanks Mr Clondfadda,

Good clarification, so it'd need to be a LTD with at least 5 members for everyone to avoid self-employed status, presuming that there's no requirement for at least 1 self-employed director. Good to know!

And I'm fully determined to succeed, and I believe I will - but I'm not trying to "go into business", I'm fishing with a company that has nothing in Europe, for a role that doesn't exist. So it's not their prerogative to set up a legal entity here, hence why I'm looking for an easy way they can employ me without me losing my entitlements here (which I'm perfectly prepared to pay for, as I am currently). To be honest, it seems a bit ham-fisted that things are set up so that if you are self-employed, you can't retain full stamp payments even if you have both the desire and the means to do so, but it does appear to be the case.

I'm fully expecting long-term success if I do go this route, but I'm doing due diligence in attempting to minimise my risk in the process. My wife, baby, and loss-making bank might have cause in the future to thank me for my mix of optimism and caution!

ssbob

divot wrote: »

Thanks Mr Clondfadda,

Good clarification, so it'd need to be a LTD with at least 5 members for everyone to avoid self-employed status, presuming that there's no requirement for at least 1 self-employed director. Good to know!

And I'm fully determined to succeed, and I believe I will - but I'm not trying to "go into business", I'm fishing with a company that has nothing in Europe, for a role that doesn't exist. So it's not their prerogative to set up a legal entity here, hence why I'm looking for an easy way they can employ me without me losing my entitlements here (which I'm perfectly prepared to pay for, as I am currently). To be honest, it seems a bit ham-fisted that things are set up so that if you are self-employed, you can't retain full stamp payments even if you have both the desire and the means to do so, but it does appear to be the case.

I'm fully expecting long-term success if I do go this route, but I'm doing due diligence in attempting to minimise my risk in the process. My wife, baby, and loss-making bank might have cause in the future to thank me for my mix of optimism and caution!

Like I said already mate, you should put aside any extra money you have or against your mortgage or whatever and at least you will have your very own rainy day fund.

Mr Clonfadda

ssbob wrote: »

Like I said already mate, you should put aside any extra money you have or against your mortgage or whatever and at least you will have your very own rainy day fund.

I have to agree you are looking at paying 10.75% (Employers PRSI) to the government for this option.

NumbrCrunchr

Mr Clonfadda wrote: »

Director with 25% or more Shareholding is classed as self employed.

Proprietary directors have a shareholding of at least 15% not 25%. Also if you are combining with other directors you need to be aware of the close company provisions:

http://www.revenue.ie/en/tax/ct/close-companies.html

To the OP:
You should find out when your PRSI entitlements cease, if this is 4 years as one contributor said, you have some time on your hands. There is talk of this crazy situation being resolved where self employed people do not have a safety net as it is discriminatory and doesn't support an entrepreneurial culture.
On the plus side if you go self employed / proprietary you do make a real 10.75% saving on salary costs. Before your entitlements cease the situation may resolve itself or failing that you would just need to start paying an A class stamp to renew. This doesn't need to be a full time job and you could carry on as self employed.

REgards
Numbercruncher

ssbob

NumbrCrunchr wrote: »

Before your entitlements cease the situation may resolve itself or failing that you would just need to start paying an A class stamp to renew. This doesn't need to be a full time job and you could carry on as self employed.

This is quite correct, you could get a part time job and remain paying your stamps and therefore be covered if things go belly up. Although your full time job will probably be enough work for any man.