IT contracting and tax as ltd company

superfly35

Hi everyone,

I am new to this area so be gentle
I am a full time employee at the moment, but I have been contacted by agency to go contracting.
So in order to discuss daily rate with them I will need to work it out.

There is few thing that I figure it out, I will setup a limited company as it will made the trade easier.

The thing I am not sure about is how much would I bring it home if I have a daily rate of €350 for example.

Month
350*22 = 7700 a month

Year (working 11 month a year)
7700 * 11 = 84700 yearly

I am wondering it the calculation then as simple as :

Income : 84700
Income tax (41.5%) : 84700-32800 = 51900 * 41.5% = 21538.5
Income tax (20%) : 32800*20% = 6560
Total income tax : 28038

Take home : €56661.5

I know that there is no PRSI for the salary director as I will be a director the 10.5 does not apply.
I know as well the VAT will be charge at 23.5% but that will be on the top of the original €350.

I am sure I am missing something in this calculation some tax which I am not aware of.

If somebody could give me some pointer it will be really appreciate.

Thanks

Alan Shore

No bank holidays for you at 242 days per annum.

Anyway Directors pay class S PRSI at 4% and USC so €3,388 and €5,248 in extra taxes.

Try http://www.deloitte.ie/tc/ to check

superfly35

Thanks a million Allan.

I realise that after the 242 days, the 230 is probably more realistic.

Thanks for the calculator it is very helpful, I have now a fair idea of which kind of rate I should be asking taking the tax into account.

Cheers

Bobby1984

I wouldnt go jumping in to this one before putting a bit more thought into the following:

What other expenses you may have in order to trade as a company?
Have you done any calculations on corporation tax?
Have you thought about whether you wuold be considered a professional services company (possible surcharge)?


As a side note, the vat rate is only 23%.

I am not saying that you shouldn't go ahead with the decision to set up a company in order to go contracting. However make sure you have fully researched the path you are going to go down before you make a decision as you may regret it further down the road.

Hope it goes well no matter what you do.

superfly35

I guess to trade as a company I will need to pay an accountant to submit this account yearly and ensure it is all good.

I did not do any calculation with the corporate tax, as I am attempt to pay myself fully with the revenue generate by the company.
I won't have any employee, it is effectively like sole trader.

I guess there will be no professional services company surcharge like that as all the income will be distribute as salary.

I agree with you need to put more thought into it, and discuss with my account before going ahead.

I was asking the question to have a good head start to be honest.

Stheno

Any of the companys who do this on behalf of contractors will happily discuss this with you and do up estimated calculations for you before you even get a contract.

They will also take care of the financial/legal/tax obligations.

If you just give them a call/email them in an enquiry you'll get a lot of information from them

superfly35

Thanks for that would you have any company to recommend?

As I think some professional advice would not be bad, I have some basic accounting notion but I am no where from been expert in the field.

capefear

superfly35 wrote: »

Thanks for that would you have any company to recommend?

As I think some professional advice would not be bad, I have some basic accounting notion but I am no where from been expert in the field.

Op were are you based.

superfly35

Cheers Capefear.
I am based in South Dublin.

capefear

Hi this was an answer I gave to a similar post on a different site so excuse the figures
Hopefully it will help.

You dont mention if the 92000 is before or after vat at 23% so we will assume its before vat so 92000 @23% vat is 74795. we will assume that you take all this out as salary with no pension or expenses just so you get an idea of the tax involved.
Salary €74795
PRSI Class S
Cutoff Point €65600
Tax credits 3300
PAYE 13589
USC 4554
EE; PRSI 2992
Net Pay 53658

No as I mentioned the above figures don't include pension or expenses.

Expenses: You should read the IT51 & 54 information leaflets from the revenue and become familiar with the civil services expense rates you can claim for mileage and subsistence.

These are generally the only afew ways you can take money out of a company.
1. Expenses that are incurred wholly, exclusively and necessarily in the performance of the duties of the employment.
2. Wages: the more you put through as salary the more tax you pay, so less is best within reason .
3. Pensions: just say Im wrong in assuming the 92000 includes vat and its 92000 after vat and you have paid yourself a gross salary of 74795 so you have a profit of (92000-74795) = 17205 left now you have two options
A. You leave this money in the company and pay corp tax on it and also the close company surcharge or
B. pay this profit into your pension and by doing this you dont have to pay corp tax etc. The only thing to take into account with pensions that you are restricted to the amount you can put in each year depending on age.
4. Civil Service mileage and subsistence rates. See IT54 & 51. These are your expenses that you don't need a receipt for but need to keep a diary. A word of warning here, these expenses can be a good way to get money out of the company but don't take the pizzz as was mentioned above its great paying no tax until you have a revenue audit. And according to a tax specialist I was talking to last week the revenue are doing a lot of desk audits on motor expenses & subsistence etc. So you just need to be smart in how you claim these expenses. Eg say you need to stay an over night in a hotel, pay the hotel using your personal laser card. Say the hotel costs you €50.00 you can claim back €140 ( i dont have correct figure to hand) using the civil service overnight rates, once you keep a log in your diary no receipt needs to be kept just who you had the meeting with and you submit and expense form to the company for €140 and your up €90.00.
As I said just be clever and dont talk the pizzz.

Also just bear this in mined, when you become self employed you and the wife are taxed at prsi rate S so you wont have the same entitlements as paye workers if the business goes belly up.

I hope this helps sorry its late so the grammar etc aint the best.

superfly35

Thanks a million Capefear. It is extremely helpfull.

I will take a read the thing you mentioned.

I have a question about the second director (my wife) as you mention she will be in PRSI class S, and she also has her own job as a employee and she paid the standard rate.

Would that be a problem if she was been made redundant for example ?

Will she still be able to get social benefit and all?

capefear

Sorry

My mistake. I wrongly assumed it was 50/50 shareholding with each director.
Directors who own 15% or more shareholding and are normaly prsi class S.

If your wife is a working with another company and is a paye employee she will not be a prsi S she will be prsi A and entitled to the paye tax credit and been a director of your company wont affect any redundancy.

superfly35

Brilliant thanks a million for that.
Those are really valuable information for me.