IT Contracting and tax ?

Fr Tod Umptious

Hi
Not sure if this for Work & Job or Taxation but here goes.

I live down the country and may have a daily rate IT contract job coming along in Dublin.

I would be registered for VAT and billing the agency that found me the job, rather than the company itself.

If I were to do it I would have to get a place to live in Dublin and be there Monday to Friday and come home to my wife and kids at the weekend.

Does anyone know if 100% of the rent I pay in the place in Dublin could be put down as an expense when I do my taxes or would revenue determind in some shape or form that the Dublin place would be my primary residence and not allow me to claim it as an expense ?

The same goes for the travel expenses that I would incur travelling to and from Dublin, would they be 100% claimable.

I have been a VAT registered contractor like this before but not living away from my home at the time.

Thanks

Stheno

Highly unlikely Revenue would allow either of those expenses tbh in my experience

Fr Tod Umptious

Stheno wrote: »

Highly unlikely Revenue would allow either of those expenses tbh in my experience

Thanks
Can you give a reason why they would not be allowable ?
I am aware that they are cracking down on 'spurious ' IT contracting expenses

Would rent and travel be in that category ?

Mr. Loverman

If I were you I would ask a tax accountant.

Taking advice from people on boards.ie could get you into a lot of trouble. There's a lot of nonsense posted as fact here.

Fr Tod Umptious

Mr. Loverman wrote: »

If I were you I would ask a tax accountant.

Taking advice from people on boards.ie could get you into a lot of trouble. There's a lot of nonsense posted as fact here.

Oh I certainly will be seeking professional advise, I was just wondering at a high level if those deductions would be allowed

nollag007

If you have a primary residence in the country ie own a house, and you have to relocate to Dublin for the job then you are able to claim the rent in Dublin and also travel to/from Dublin once each way per week. As far as I know this is only for three months but your accountant should be able to confirm all

Stheno

I've always found contacting the likes of CXC good when I was taking up a contract and running through all of the scenarios with them, they know the ins and outs of contracting and tax

bmm

Civil Service Subsistence rates and rules is where to look.

http://www.revenue.ie/en/tax/it/leaflets/it54.html

Fr Tod Umptious

Stheno wrote: »

I've always found contacting the likes of CXC good when I was taking up a contract and running through all of the scenarios with them, they know the ins and outs of contracting and tax

I have just been talking to them actually and they have been very helpful.

rat_race

nollag007 wrote: »

If you have a primary residence in the country ie own a house, and you have to relocate to Dublin for the job then you are able to claim the rent in Dublin and also travel to/from Dublin once each way per week. As far as I know this is only for three months but your accountant should be able to confirm all

Nollag is right, you can fully claim tax relief on three months full rent costs, if you relocate for the contract. After that, if you use it like an office for some of the time, you can also claim a certain percentage.

For example, I'm an IT contractor and I work from my apartment and sometimes in a couple of other offices. I claim about 50% relief on my ongoing costs for my rent, electricity, internet, etc., as it's business related.

Not sure about the to/from Dublin though, as it's not a business related journey. But you can claim mileage on any business related travelling that you do -- even if it's just to Tesco to buy a pen -- as well as expense the pen itself! There's lots of other reasonable thins you can claim against too...

Ray Palmer

I think if you take a room in a B&B or hotel you will be able to expense it indefinitely.

It is easy enough to find one that will give you a reduced rate for a continual stay. I know a few people who did before and it suited them. Usually only taking 4 nights a week and I remember one guy had a discount on meals too. He had access to a gym as well which made the whole thing a very good deal.

I found CXC expensive compared to other accountants

The_Conductor

The OSK Guide to contracting in Ireland- is a very good document that gives you some very good pointers.

Link here

Eoin

Fr Tod Umptious wrote: »

Not sure if this for Work & Job or Taxation but here goes.

Moved to "Entrepreneurial & Business Management" instead - probably the best bet for contracting queries.

dbran

Hi

There is a lot of uninformed advice being given here. None of these costs are allowable at all.

It is a well established principle of the revenue that it is the tax payer who chooses where to live and where to work. This is a lifestyle choice and not a cost of the business.

The rent on the place in Dublin is primarily incurred to shorten the commute and is not allowable. The travel up from the country is also not allowable as it is travel from home to work which is never allowable.

The revenue are getting very tough on one man contractors such as yourself and if the work is essentially carried out at the company's premises none of these costs are allowable.

Kind Regards

dbran

srsly78

dbran wrote: »

Hi

There is a lot of uninformed advice being given here. None of these costs are allowable at all.

It is a well established principle of the revenue that it is the tax payer who chooses where to live and where to work. This is a lifestyle choice and not a cost of the business.

The rent on the place in Dublin is primarily incurred to shorten the commute and is not allowable. The travel up from the country is also not allowable as it is travel from home to work which is never allowable.

The revenue are getting very tough on one man contractors such as yourself and if the work is essentially carried out at the company's premises none of these costs are allowable.

Kind Regards

dbran

You have also provided misleading information. It is a complex area, and making blanket statements like "never allowed" is not correct.

For example, I usually work from home. But I make frequent business trips to London to work on site with the customer. Now tell me what is allowable? I have an accountant that advises me on this so I'm not looking for a freebie

dbran

srsly78 wrote: »

You have also provided misleading information. It is a complex area, and making blanket statements like "never allowed" is not correct.

For example, I usually work from home. But I make frequent business trips to London to work on site with the customer. Now tell me what is allowable? I have an accountant that advises me on this so I'm not looking for a freebie

It is a very complex area and sometimes it can depend on how it is argued. But travel from home to office or normal place of work has never been allowed. And revenue are now taking a very aggressive view of where your normal place of work is such that a lot of the business travel is now falling into this category.

And if all the work is done at the clients premises and only very small token amount is actually done at home then your business trips are a commute and not allowable.

I not getting into a slanging match with you. Who you choose to believe is your own decision.

dbran

srsly78

I take my accountant's advice naturally.

Nowhere is "normal place of work" defined. What if I am only doing 3 month stints? The revenue will let you rent an apartment in London to do a contract, there are even worked examples on this on the revenue website. Why would the same not apply domestically? As you say, it's a complex area. So "never allowed" is a bad generalisation.

Also, normal PAYE tax payers can avail of www.taxsaver.ie - which effectively lets them expense commuting to work (via tax relief on public transport). Is it really the case that self-employed people cannot do the same?

Atomico

srsly78 wrote: »

Also, normal PAYE tax payers can avail of www.taxsaver.ie - which effectively lets them expense commuting to work (via tax relief on public transport). Is it really the case that self-employed people cannot do the same?

Actually I would be very interested to hear more on this. I don't see why self-employed people cannot benefit from all this taxsaver stuff regular 9-5ers enjoy.

srsly78

I will let you know when I get audited I have a leap card I use for business travel. This is pretty good as you can see all the travel details on the website (great for record-keeping).

dbran

Hi Srsly

Here is the revenue's recently issued statement of practice on the subject. It is only recently issued by the revenue so your accountant may not be aware of it yet or its significance.

http://www.revenue.ie/en/practitioner/tax-briefing/2013/no-032013.html

It gives some detailed examples of what is allowed and what is not and they are taking a very very hard line view pretty much diss-allowing everything. They are also actively investigating "one man band" type companies, approaching agencies etc. so it is going to be a very hot topic in tax over the next while.

With this in mind, I think you may need to consult with your accountant again and ask if their advise that they gave you still holds. If you are happy that it does not apply to you then great. But you do need to consider it because if it is not allowable then these expense payments are then treated as taxable salary. That will potentially mean a very big cheque to the revenue.

Kind Regards

dbran

The_Conductor

Atomico wrote: »

Actually I would be very interested to hear more on this. I don't see why self-employed people cannot benefit from all this taxsaver stuff regular 9-5ers enjoy.

Tax saver bus/rail tickets- may suit some people- but a significant cadre of employees are not on suitable public transport links and/or need to leave the kids to creche/school etc- so it just doesn't work out (is not applicable).

A fairer system would be to allow all workers- PAYE or self employed, to claim mileage rates against their gross taxable income, for journeys to and from work. I can't see it breaking the bank- and if it applied across the board- it would be equitable.

The current system isn't fair on those who are contractors- or those who for whatever reason can't avail of it.

srsly78

@dbran: Good to see some proper guidance from the Revenue for a change. I might have a small amount of domestic expenses disallowed, but business trips to London are the big one and they are totally legit.

@atomico: The taxsaver thing is supposed to incentivise public transport, to get people OUT of cars and thus reduce congestion! So giving people milage expenses would work against that. I think directors can still avail of it, so maybe it's not disallowed for the self-employed. Sole traders might be screwed tho. Also note that you can buy yourself a fancy bike through company

ImDave

I'm going through the process of preparing to go down this route at the moment, and one thing I have found is that it seems much more preferable to go down the Limited Company route as opposed to a Sole Trader from a taxation perspective when it comes to paying expenses etc. I know there is much more obligations in terms of CRO annual filing, the initial work in terms of M&AA etc., but is this the general consensus?

srsly78

Yes. And also many clients won't deal with sole traders.

Atomico

srsly78 wrote: »

@atomico: The taxsaver thing is supposed to incentivise public transport, to get people OUT of cars and thus reduce congestion! So giving people milage expenses would work against that. I think directors can still avail of it, so maybe it's not disallowed for the self-employed. Sole traders might be screwed tho. Also note that you can buy yourself a fancy bike through company

I know, that's what I mean! It would be great if there was some sort of tax-saver scheme for public transport for self-employed people.

The_Conductor

Atomico wrote: »

I know, that's what I mean! It would be great if there was some sort of tax-saver scheme for public transport for self-employed people.

And for those of us- without access to public transport.

srsly78

Atomico wrote: »

I know, that's what I mean! It would be great if there was some sort of tax-saver scheme for public transport for self-employed people.

Directors can avail of it I think... I couldn't see any exemption. Directors do count as employees as well.

EamonOSullivan

dbran wrote: »

Hi Srsly

Here is the revenue's recently issued statement of practice on the subject. It is only recently issued by the revenue so your accountant may not be aware of it yet or its significance.

http://www.revenue.ie/en/practitioner/tax-briefing/2013/no-032013.html

It gives some detailed examples of what is allowed and what is not and they are taking a very very hard line view pretty much diss-allowing everything. They are also actively investigating "one man band" type companies, approaching agencies etc. so it is going to be a very hot topic in tax over the next while.

With this in mind, I think you may need to consult with your accountant again and ask if their advise that they gave you still holds. If you are happy that it does not apply to you then great. But you do need to consider it because if it is not allowable then these expense payments are then treated as taxable salary. That will potentially mean a very big cheque to the revenue.

Kind Regards

dbran

Sound advice from Dbran.

Revenue are going after small operators who are operating through limited comapnies, especially where those operators are claiming a high percentage of their income is paid back out in travel expenses.

Personally I give people all the options, and end with the health warning that overclaiming can end in a Revenue Audit and in there being an unforeseen tax bill.

srsly78

The Revenue is currently crucifying contractors in the south from what I am hearing. Several contractors are taking court cases against the Revenue disputing the interpretation. Will be interesting to see the results.

In the UK there is a contractors association - if you are a member the association will fight in court for you (thus saving you the huge expense). Someone sent me a link to a newly formed Irish equivalent: http://ipcireland.net/ I am not a member but am considering it.

The_Conductor

srsly78 wrote: »

The Revenue is currently crucifying contractors in the south from what I am hearing. Several contractors are taking court cases against the Revenue disputing the interpretation. Will be interesting to see the results.

Personally aware of two IT contractors undergoing full audits (going back over the last 4 years). Yes- it looks like there is a massive crack-down under way.

srsly78

Heh, my accountant almost missed my ARD because he is so busy with other clients being audited