Salaried partner issue

Autobotsarego

Been offered partnership in my firm. My current salary is 60k (as a manager), what should I be expecting salary wise as a salary partner (hoping to move to equity partner down the line).

My employer is saving employers prsi (6k plus), I'm giving up paye credit (or 2/3rds of it for 2016), and the security of being employed/redundancy entitlement.

Ill be taking on a bit more responsibility but nothing major as I already do most things a partner would in a small firm.

I assume I should be looking for 65k anyway given employers prsi saving.

Also how am I going to get past the requirement to pay income tax on first years salary plus the preliminary tax? Basically 2 years tax in one go?

Avatar MIA

Autobotsarego wrote: »

Also how am I going to get past the requirement to pay income tax on first years salary plus the preliminary tax? Basically 2 years tax in one go?

Can't believe you're asking this question. Check out the rules.

nompere

Autobotsarego wrote: »

Been offered partnership in my firm. My current salary is 60k (as a manager), what should I be expecting salary wise as a salary partner (hoping to move to equity partner down the line).

My employer is saving employers prsi (6k plus), I'm giving up paye credit (or 2/3rds of it for 2016), and the security of being employed/redundancy entitlement.

Ill be taking on a bit more responsibility but nothing major as I already do most things a partner would in a small firm.

I assume I should be looking for 65k anyway given employers prsi saving.

Also how am I going to get past the requirement to pay income tax on first years salary plus the preliminary tax? Basically 2 years tax in one go?

Because I know from within my firm just how little some qualified accountants know about tax matters, I will answer these questions.

A salaried partner is a job title. You will remain on PAYE, you don't have to do self-assessment, you don't have Case 1 or Case 2 earnings, you don't have to pay preliminary tax, and your employer doesn't save employer's PRSI.

Avatar MIA

nompere wrote: »

Because I know from within my firm just how little some qualified accountants know about tax matters...

I'm not going to pick this thread to argue with you :pac:

Autobotsarego

Sorry I meant the prelim tax when I go equity partner. The timeframe is a year later. The salary only partner is more a trial thing and I'm told standard enough practice.

And yes I'm not fully clued up on tax (audit my area).

Say I'd mainly salary and then say 5pc equity share would I still be paye on the salary element? Or would the whole thing fall under self assessment?

Marcusm

Read this and then assess your position. A qualified accountant should be able to do their own basic tax return asit helps them keep abreast of that aspect of practice. At the salary level you mention, it's definitely best not to limit your development to a single practice area.

http://www.mhc.ie/uploads/Irish_Tax_Review_Gavin_OFlaherty_Muireann_Brick_April_09.pdf

Jim2007

Autobotsarego wrote: »

And yes I'm not fully clued up on tax (audit my area).

You ask about paying preliminary taxes, but have you established if you will be expected to buy into the partnership or are the existing partners happy to let you in for free?

Autobotsarego

Jim2007 wrote: »

You ask about paying preliminary taxes, but have you established if you will be expected to buy into the partnership or are the existing partners happy to let you in for free?

In for free with small equity share initially.

The only major stumbling point at present is my apprehension of being self employed and having to come up with 2 years tax in one year initially.

And from my reading last night this will be on my salary and equity once I become a full equity partner.

Avatar MIA

Autobotsarego wrote: »

In for free with small equity share initially.

It's possible the Revenue will have an interest, and I see you still haven't looked up the Preliminary tax rules.

Jim2007

Autobotsarego wrote: »

In for free with small equity share initially.

I must say that would give me cause for concern! In a profitable practice one would expect that the existing partners would expect a reasonable sum for the reduction in their share of the profits... Have you seen the books, are you sure it is worth giving up a fixed salary for a share in the profits? Especially given the extra responsibilities and potential liabilities you may be taking on?

dudara

Go speak to a proper advisor, who is used to the intricacies of partnerships and self-employment. Any of the Big 4 or Big 6 will have staff who know this topic inside out as they will administer it for their own partners. It will be worth it.

Autobotsarego

Avatar MIA wrote: »

and I see you still haven't looked up the Preliminary tax rules.

Enlighten me - i'm missing your point.

At some stage I'm going to have to pay a years tax plus 100% again or 90% of expected profit unless i'm missing something?

Avatar MIA

Autobotsarego wrote: »

Enlighten me - i'm missing your point.

At some stage I'm going to have to pay a years tax plus 100% again or 90% of expected profit unless i'm missing something?

Have you read the rules? I'm already putting more effort into this than you, and it's not my issue.

Autobotsarego

Avatar MIA wrote: »

Have you read the rules? I'm already putting more effort into this than you, and it's not my issue.

I have but I feel like I'm missing something.

I get the first year thing, but then i'll face the issue in the 2nd year.

Once I'm equity partner I become self assessed on all income.

So????

Anyway as suggested above I'll be going to talk to someone who's more knowledgeable on tax than me.

Avatar MIA

Is it possible you will be salaried and be an equity partner (not receiving a salary) in the same year?

You wont pay prelim in your first year.

Autobotsarego

Avatar MIA wrote: »

Is it possible you will be salaried and be an equity partner (not receiving a salary) in the same year?

You wont pay prelim in your first year.

My understanding is that once I'm an equity partner - I can't take salary at the same time (well not salary that counts as paye) - it will just be considered drawings.

Yeah I always knew I wouldn't have to pay prelim the first year but you're as well off as I'll have to 'catch up' later anyway.

Anyway I figured out from cash flow wise that at least i'll have 10 months of the following year to save the full tax for that year (It will be tight but doable).

So as example

2015 - €60k drawings - put €20k aside as tax

2016 - Will have to come up with 20k more by 10/10.5 months of taht year (so need to put aside bigger portion each month).

Not as bad as i first feared but tough all the same. PAYE much easier!

Avatar MIA

Yeah, just put the money aside. You can always set up a DD to revenue. Will be similar to PAYE then.

Good luck.