Take Home as a contractor

srsly78

DublinWriter wrote: »

The one big downside to contracting is career progression.

As a contractor it's very easy to get stuck doing the same thing again and again - it's a rare client who will pay to skill you up.

Also, a lot of contract work tends to be the stuff that none of the permanent staff want, or can do.

Plus, there will always be a level of resentment with permanent staff you work with and you typically won't be invited to departmental meetings or asked to engage in any wider decision making programmes.

Contractors skill up by doing lots of varied work (clients effectively do pay for them to skill up), silly courses and certs are irrelevant compared to practical experience. Sure there is resentment from permanent staff, because contractors get paid more! Not having to attend bull**** meetings would be an added bonus, unfortunately I have found they always drag me along.

Don't feel too special if you are a "permanent" employee, you can still be made redundant on whim.

ChRoMe

srsly78 wrote: »

Don't feel too special if you are a "permanent" employee, you can still be made redundant on whim.

Indeed, the only difference is the notice period at the end of the day.

Evil Phil

DublinWriter wrote: »

Revenue class a place of work as the location from which you 'normally' work, not 'officially' work.

Throwing a desk and chair into the box room and 'pretending' that you're working from home won't cut it.

Revenue have very recently clarified this and have outlined typical scenarios here

You can only pay yourself the same rates for travel and subsistance that Revenue pay their own staff. This is all dependant on engine size and total miles travelled per annum. You'll need to know all this stuff inside out.

From that link, the revenue class the place of work as where an 'Employee' would normally work. You're not an employee if you're a contractor with you're own limited company, you're a consultant from another company providing services.

This does not apply in this situation - if you allow yourself the same daily allowance and travel/fuel allowance as the revenue provides it's own people there shouldn't be a problem. Again an accountant will help with this.

The point is a contractor is not an employee, but an external consultant. The company where the work performed is not an employer but a client, or a client's client if you're working through an agency.

srsly78

The point if you spend too long working for 1 customer suddenly the tax treatment can change. There were guys out there working for the same "client" for 5 years or more, doing the same commute every day. These guys (and their "customers" got handed massive back-dated penalties).

Noone knows what this magic cutoff time is tho! Only a bunch of court cases challenging the revenue will reveal this. Until then unofficial rule is "whatever you can get away with". Pushing your luck too much will get you audited and spanked.

Contractors are a funny bunch, I am reminded of a colleague that would mooch around Luas stations collecting discarded tickets - you can guess why!

Evil Phil

Have you any evidence supporting this claim? I worked in contracting for 8 years and I've never heard of that happening once. It's perfectly legal.

<edit/>
If you're submitting actual expenses that's okay. If you're submitting falsified expenses that's fraud which is illegal.

Frank Lee Midere

I'm pretty dubious about lunch being deductible. I know it isn't in the UK. You eat lunch anyway. Travel should be - to work out why imagine your home office was in Dublin and you commuted to Galway daily. Clearly that's an extra expense. Lunch however is an expense you would be paying anyway. Also in the UK if you go over 18 months you are treated - and i think retrospectively treated - as an employee. So you owe back taxes. In the US IT contractors are taxed in most cases as employees.


It also matters if you bring a computer to work in the UK.

srsly78

Phil you must be living under a rock so. There has been lots of discussion about this over the last few years, nowadays companies won't keep contractors on more than 2 years - otherwise suddenly the contractors can in theory claim redundancy benefits! Also the Revenue may come looking for employers prsi. There is sufficient uncertainty in the area to make companies pay attention closely.

I got my last gig because they laid off contractors that hit the 2 year limit.

Evil Phil

srsly78 wrote: »

There has been lots of discussion about this over the last few years ...

How exactly were you contracting? I paid the employers PRSI for myself as I was an employee of the my limited company. And if you're not going to be in a contract for longer than 2 years, a very long contract in the limited company/contractor scenario, then you won't be travelling for the 5 years from your previous post.

My point is this: it's perfectly permissible to charge business expenses when you're running a limited company, as long as you stay within the rules dictated by the Revenue.

It's not that you don't have a valid point, there is a line between standard business expenses and fiddling the books. From the nature of your posts I wonder if you contract through an agency who handles everything for you, or do you run a limited company?


Regarding lunch: A per diem used to be allowable depending on the location of the contract, that may have changed. Again an accountant will advise on that.

srsly78

You weren't a director so, there is no employers prsi with class S. This means you were using an umbrella, or someone else had the shares? The criteria for class S is to be a "proprietary director" which means over 15% shareholding I think. Also means you have to fill in a form 11 personal declaration every year too.

I operate a limited company as director, and an accountant advises me.

Evil Phil

I was the managing director, but I wasn't class S, it was a something similar which I can't remember. Perhaps things have changed in the last 3 years?

srsly78

Evil Phil wrote: »

I was the managing director, but I wasn't class S, it was a something similar which I can't remember. Perhaps things have changed in the last 3 years?

Was that one of those "managed company" offerings? They give you an "off the shelf" company and run it for you? Costs a fortune imo, much cheaper to run it yourself. The employers prsi contribution is 10.5% tax. That's pretty huge... It DOES let you claim jsb tho! This stuff hasn't changed in the recent past (apart from usc).

Back on topic:
From the radio today -> Joan Burton wants self-employed people to pay more prsi, so we can haz invalidity pensions... No thank you!

John_Mc

My accountant has been sending me information about Revenue focusing their attention on Contractors at the moment. If you look at the attached, you'll see that they are have changed their outlook on expenses which can be claimed.

I can't imagine this stance being accepted as it's completely unreasonable and it will definitely be challenged in court if need be.

The second attachment is the Irish Tax Institute submission to Revenue about same. You can't help but agree with them as they clearly illustrate the absurdity of the Revenue position with real world scenarios.

As for take home pay as a contractor, it's hard to work out as you can have your company pay for your mobile phone, broadband, PC hardware, legitimate mileage & sustenance etc.

I started as a contractor last October and am enjoying it and happy I left a "permanent" job where I was doing well to do it.

srsly78

I think what the Revenue have a problem with is guys that claim for all the home office stuff, but spend 99% of their time on-site with customer.

What % exactly of time, and over how long a period is "normal place of work" to be decided? This is not well-defined. Common sense would say where you spend most (>50%) of your time, but I can't find any rules specifically saying that.

neil_hosey

DublinWriter wrote: »

The one big downside to contracting is career progression.

As a contractor it's very easy to get stuck doing the same thing again and again - it's a rare client who will pay to skill you up.

Also, a lot of contract work tends to be the stuff that none of the permanent staff want, or can do.

Plus, there will always be a level of resentment with permanent staff you work with and you typically won't be invited to departmental meetings or asked to engage in any wider decision making programmes.

Im developing 6 years now, ive yet to meet one employee that will actually skill me up.. maybe im in the wrong companies!

The Corinthian

srsly78 wrote: »

Was that one of those "managed company" offerings? They give you an "off the shelf" company and run it for you? Costs a fortune imo, much cheaper to run it yourself.

Shop around; while there are specialized companies that offer these packages, there's a good few accountants that effectively do the same thing and charge a lot less.

I'd also recommend a 'managed service' though if you're just going to be contracting. There's a lot less hassle (especially if you decide to go back to full time employment and you have to close down your company) and if you get a good deal from a good accountant they can handle deductions for you.

Of deductions, you do need to be able to demonstrably be able to show that they're business rather than work related. My memory of how travel works is that you can claim on this when it involves a certain minimum distance, so it wouldn't apply for basic commuting. Lunch can be claimed, but you're going to have difficulty claiming that you're, for example, having lunch with a client every day. If you're working far from your home office, I think it can be claimed as subsistence, but you would have to check with an tax accountant on this.

Home office expenses, such as part of your rent, electricity, mobile bill and so on can also be claimed, although I believe they've tightened up on this a fair bit. Purchases (e.g. a new laptop) also can be claimed, as well as VAT, but you have to remember then it becomes an asset of your company, not yours - depreciation will eventually sort this out for you, but not immediately.

And as to permanent employee 'resentment'; what the fsck do you care? Contractors are there for the money, if you want to train up send yourself off on a course (valid business expense) and do you really want to be sucked into their petty politics?

Additionally in some larger companies, there are few if any permanent employees, so you don't really see than kind of attitude much. I did a few contracts out in a certain mobile operator based in Berkshire some time back and outside of the managers and secretaries, everyone seemed to be a contractor. Indeed, few of us even lived in the UK and we used to commute back home every weekend.

The employers prsi contribution is 10.5% tax. That's pretty huge... It DOES let you claim jsb tho!

That can be an important point to remember - many accountants/financial advisers will by default help you avoid this, so that your take home looks better, but then you run the risk that the work dries up in the future and you will only be eligible for means-tested JSA; which after a while on contracting rates, isn't going to go well for you.

jjkiernan

Have you tried a specialist contractors accountant. They set you up as a director of an umbrella company, and pay you through Paye system, they manage all your expenses, claims, income tax etc for you. Pretty cheap in my opinion for saving all the hassle. I use one over in swords, good value compared to other ones I've seen.

neil_hosey

theres one thing im worred about..

Using the ICON Accounting Tax Calculator for contractors, I see that the take home for a 450 a day contract, working 220 days, is only 48221.07 EUR.. working out at just over 4 grand a month! A retension rate of 48%!! :eek:

I definately dont want to do it, if i can earn near enough to that on a permy role! Is that correct?

PM or message welcome please, i cant get a straight answer on what the actual Take home pay is on a 450 a day contract!

Thanks
Neil

srsly78

Calculators are useless. There is no one single "arrangement" for contractors so it could mean anything. However, the worst case scenario tho = (earning over 100k) - self employed people end up paying more tax than normal employees.

Also you should assume 200 days, not 220 (need to leave more margin for downtime).

neil_hosey

srsly78 wrote: »

Calculators are useless. There is no one single "arrangement" for contractors so it could mean anything. However, the worst case scenario tho = (earning over 100k) - self employed people end up paying more tax than normal employees.

Also you should assume 200 days, not 220 (need to leave more margin for downtime).

I don't get it though, Im finding it so hard to just find a figure for a 450 a day contract, assuming 220 days as that takes into account 40 days holidays/public holidays/down time.. which I won't go over.

srsly78

There's aren't 260 working days in the year Assume 240 working days then subtract your 40! I didn't realise there were so many damn holidays etc until I became a contractor.

Expenses is the big thing you aren't taking into the account, and expenses are also the most controversial area. Many contractors will boast about their extreme tax efficiency when in fact what they are doing will not stand up to audit. It turns out as a contractor you want to personally earn as little as possible (less tax to pay), this can be done by spending on expenses/equipment/other employees.

Further confusing things is the fact that normal paye employees can also claim most of these expense, if their employer facilitates this. This thing is most employers will NOT facilitate this (they will do things to suit the company not the employee).



You really need to talk to an accountant or tax advisor about this. Initial consultancy is usually free. Just make sure you shop around tho!

The Corinthian

srsly78 wrote: »

Further confusing things is the fact that normal paye employees can also claim most of these expense, if their employer facilitates this. This thing is most employers will NOT facilitate this (they will do things to suit the company not the employee).

I don't think that the problem is entirely down to the employer as many of these may be claimed later as rebates. Problem arises from the fact that many PAYE workers are either ignorant of the fact that they can claim these expenses and/or too lazy to actually apply for them.

Lbeard

KonFusion wrote: »

Talk to your accountant. You can also claim pretty much anything (apart from booze).

No, he can invoice me for cloud services.........and I will squeeze booze from the cloud.