Untaxed income versus foreign income

thewiseowl12

Just hoping for some advice on the following:


I'm an IT consultant and I've been doing a bit of work for a guy based in England - I'm going declaring this now through the revenue online tool.

However, is this classified as "untaxed income in the state" (given that I did the work whilst living here) or as "foreign income" as the guy who paid me is domiciled in england?

What is the difference between these types of income?

Many thanks

srsly78

I also am an IT consultant that works all the time for guys in the UK, I am based in Ireland. I send them an invoice every month and they pay me. This counts as exports from my Irish company to the UK. My personal income is my salary paid to me by my Irish company, and as such is subject to normal paye etc for a director.

Are you a sole trader or a company? Situations like this are where it really helps to be a company I think (VAT etc). On my VAT form I have to fill out a special section about EU exports/imports. Also I have to fill out a VIES form, giving details of the VAT number of the EU companies I exported to.

Even as a sole trader, what you are doing is exporting it seems. Ring the tax office.

Some more tips: If at all possible, open a UK bank account (not so easy). Either that or use an FX service. Get them to pay you in Sterling if possible, and do the conversion yourself. Otherwise the bank takes a cut of 5% of your wages from FX.

thewiseowl12

Thanks for your reply.

As it was an off the cuff job I got I never bothered setting up a company and he has since paid me for last years work.

As it seems to have turned into a recurring job, I may go about setting up a company. However, naively I would have though there wasn't much point (in the sense) that the corporation tax rate may be 12.5% but withdrawing the money for personal use invokes paying the tax on it anyway.

Are there efficient ways of withdrawing the cash for personal use?

srsly78

Expenses and pension. Sole trader can also avail of this tho. Company director also pays slightly less prsi, but also has reduced tax credits - also can only get means tested dole.

You won't be paying any corporation tax because your 1 man company won't make a profit - you would pay out all the money as salary and expenses and bonus.

If you are gonna do contracting seriously then setup a company. If it's only a once off then don't bother. Lots of places won't even consider you if you aren't a company.

Even if you are a sole trader you should set up a seperate bank account, keeps work/personal clearly seperated. Makes accounts a lot easier if nothing else.

Mr. Incognito

srsly78 wrote: »

I also am an IT consultant that works all the time for guys in the UK, I am based in Ireland. I send them an invoice every month and they pay me. This counts as exports from my Irish company to the UK. My personal income is my salary paid to me by my Irish company, and as such is subject to normal paye etc for a director.

Are you a sole trader or a company? Situations like this are where it really helps to be a company I think (VAT etc). On my VAT form I have to fill out a special section about EU exports/imports. Also I have to fill out a VIES form, giving details of the VAT number of the EU companies I exported to.

Even as a sole trader, what you are doing is exporting it seems. Ring the tax office.

Some more tips: If at all possible, open a UK bank account (not so easy). Either that or use an FX service. Get them to pay you in Sterling if possible, and do the conversion yourself. Otherwise the bank takes a cut of 5% of your wages from FX.

This is awful advice with regard to the OP.

Firstly companies are expensive, to set up, to file annual accounts and the penalties can be severe.

Also all income in a company is taxed FIRSTLY to Corporate tax and SECONDLY to income tax PLUS employers and employees PRSI- There is a PRSI exemption for company directors but Revenue are moving to close this and it has pension considerations if you don't pay it.

If your consultancy work is over 40K then think about a company, until then there is no point.

A sole trader can register for VAT just the same as a company. Read the guide to VAT in the stickies.

Seperate business accounts are a good idea.

You won't be paying any corporation tax because your 1 man company won't make a profit - you would pay out all the money as salary and expenses and bonus.

Now this is borderline, very borderline. Dangerous even.

Mr. Incognito

However, is this classified as "untaxed income in the state" (given that I did the work whilst living here) or as "foreign income" as the guy who paid me is domiciled in england?

What is the difference between these types of income?

It is foreign income but Schedule D Case 1 Income.

SCHEDULE D


1. Tax under this Schedule shall be charged in respect of—


(a) the annual profits or gains arising or accruing to—


(i) any person residing in the State from any kind of property whatever, whether situate in the State or elsewhere,


(ii) any person residing in the State from any trade, profession, or employment, whether carried on in the State or elsewhere,


(iii) any person, whether a citizen of Ireland or not, although not resident in the State, from any property whatever in the State, or from any trade, profession or employment exercised in the State, and


(iv) any person, whether a citizen of Ireland or not, although not resident in the State, from the sale of any goods, wares or merchandise manufactured or partly manufactured by such person in the State,

Go to www.revenue.ie and have a read of Irish tax implications of foreign income here:

http://www.revenue.ie/en/business/self-assessment.html

srsly78

There is nothing "borderline" about anything I posted. Please state exactly what you think is illegal instead of casting vague aspersions. I follow my accountant and tax advisors professional recommendations.

What rules the revenue might change in the future is not relevant to my 2011/2012 accounts.

I am not running a company for the fun of it, it would indeed be easier to operate as a sole trader. The problem is many of the customers/employers of IT consultants in Ireland and the UK insist on contractors/external consultants operating their own companies. I think you know the reason why too!

Mr. Incognito

srsly78 wrote: »

There is nothing "borderline" about anything I posted. Please state exactly what you think is illegal instead of casting vague aspersions. I follow my accountant and tax advisors professional recommendations.

What rules the revenue might change in the future is not relevant to my 2011/2012 accounts.

I am not running a company for the fun of it, it would indeed be easier to operate as a sole trader. The problem is many of the customers/employers of IT consultants in Ireland and the UK insist on contractors/external consultants operating their own companies. I think you know the reason why too!

I work with cross border Contractors in many many countries on a daily basis. Never have I ever experienced anyone insisting that anyone own a company to do business with so don't be coming in here with nonsense like that.

VAT is always an important consideration as its effective for companies to write it off but as mentioned you don't need a company to be VAT registered so I think you may be confusing the two.

The appropriateness of setting up a company is a subjective manner that needs to be examined on every cases merits. You may have experience of one particular structure but it may not suit everyone.

The aspertion that he will have no income and thus no corporate liability is a misnomer. At some stage one would hope in any business not to be running on a net basis where your expenses are exactly the same as your earnings.

That is not a busness model anyone should seek to follow or aspire to and you are not qualified to give tax advice so please refrain from doing so and read the charter.

A post along the lines of "I have a company and found the following usefull" is fine.

A post along the lines of " You should do XYZ" is not.

Thread closed.