Short Term Contracting in Ireland

Bobcamilleri

Hi,

I'm just starting out as a freelance IT contractor and have just won my first contract, in Ireland. I'm trying to find out what's the best structure for me to do this activity.

I have contacted 2 accountancy companies who also offer umbrella services and their advice was to use their service of becoming a director of an Umbrella. This set up resulted in me taking back home 59% of my overall gross earnings.

They advise this because I will only be contracting for 6 months.

Am I missing something here? Because whenever I do my own calculations, it's much better to set up my own company and pay 12.5% corporation tax on that. Without accounting for expenses, I would be taking home around 80% of gross earnings this way, taking into account set up costs and winding down costs.

Can anyone chip in on this? In case it turns out it's better to set up my own company, I am obviously also looking for an accountant to help out with the paperwork. Thanks

viztopia

The company's you were using were not very good at explaining things if this is your understanding to be honest! You will pay 12.5% on any profits and this is after wages and other expenses. Any wages that you take will be taxed at your marginal rate of tax which may be 41% plus usc and prsi which will push it up to over 50%. 've careful of travel expenses as revenue are clamping down on these a lot.

Bobcamilleri wrote: »

Hi,

I'm just starting out as a freelance IT contractor and have just won my first contract, in Ireland. I'm trying to find out what's the best structure for me to do this activity.

I have contacted 2 accountancy companies who also offer umbrella services and their advice was to use their service of becoming a director of an Umbrella. This set up resulted in me taking back home 59% of my overall gross earnings.

They advise this because I will only be contracting for 6 months.

Am I missing something here? Because whenever I do my own calculations, it's much better to set up my own company and pay 12.5% corporation tax on that. Without accounting for expenses, I would be taking home around 80% of gross earnings this way, taking into account set up costs and winding down costs.

Can anyone chip in on this? In case it turns out it's better to set up my own company, I am obviously also looking for an accountant to help out with the paperwork. Thanks

Bobcamilleri

No i'm not getting any good explanations at all, and i'm finding it quite hard to find comprehensive guides online. I guess they're more interested in selling me their services for now rather than giving good comprehensive advice. I found many good guides for contracting in the UK and read that the Irish system borrows heavily from it, but evidently this is not so true.


So basically, with my own company, I would only pay 12.5% tax on profits, but then get fleeced when taking out the money of the company.

viztopia

In a nutshell yes unfortunately! For a single person you can earn approximately €37k annually at 20% and balance at 40%. Usc and prsi on top of this.

Bobcamilleri wrote: »

No i'm not getting any good explanations at all, and i'm finding it quite hard to find comprehensive guides online. I guess they're more interested in selling me their services for now rather than giving good comprehensive advice. I found many good guides for contracting in the UK and read that the Irish system borrows heavily from it, but evidently this is not so true.


So basically, with my own company, I would only pay 12.5% tax on profits, but then get fleeced when taking out the money of the company.

dbran

Hi

The Irish system does not borrow heavily from the UK at all. There are certain thinks that work nicely over there that simply are not an option here and vice versa.

There is also a professional services surcharge which you may be caught for which increases the level of corporation tax on profits on professional services which are not distributed as a dividend within 18 months of the year end. So the bottom line is that if you do decide to set up an IT company in Ireland it would be important that it does not make a profit and that means everything needs to be paid out as a salary. There is probably no tax saving for you setting up an Irish Company here really.

If it is just 6 months, why not just use a UK company and pay an Irish based accountant to deal with the "Irish Branch paperwork" for Irish CT, VAT etc and get a UK accountant to handle your ongoing UK taxes?

dbran

Bobcamilleri

dbran wrote: »

Hi

If it is just 6 months, why not just use a UK company and pay an Irish based accountant to deal with the "Irish Branch paperwork" for Irish CT, VAT etc and get a UK accountant to handle your ongoing UK taxes?

dbran

I guess it's because I had a deep and thorough misunderstanding of how taxation works there

This is my first contract ever (always been full-time before). I think I will go for the Umbrella director option this time. Next contract will probably be in the UK so then I'll set up the company over there when I need it.

Thanks for all the advice.

barneystinson

dbran wrote: »

Hi

The Irish system does not borrow heavily from the UK at all. There are certain thinks that work nicely over there that simply are not an option here and vice versa.

There is also a professional services surcharge which you may be caught for which increases the level of corporation tax on profits on professional services which are not distributed as a dividend within 18 months of the year end. So the bottom line is that if you do decide to set up an IT company in Ireland it would be important that it does not make a profit and that means everything needs to be paid out as a salary. There is probably no tax saving for you setting up an Irish Company here really.

If it is just 6 months, why not just use a UK company and pay an Irish based accountant to deal with the "Irish Branch paperwork" for Irish CT, VAT etc and get a UK accountant to handle your ongoing UK taxes?

dbran

The notion that the Irish system is similar to the UK has probably contributed hugely to the behaviour that led to this:
http://www.irishtimes.com/business/personal-finance/revenue-crackdown-on-contractor-expenses-yields-9-3m-1.1831754