IT contracting and tax advice

Prussell2

Hi all,

I’m starting contracting soon as an IT resource. Not amazing money like some I have heard about but it’s all I can get and I’m happy.

I need to get an accountant or contractor company to assist with everything. That I know.

In the meantime, I have some general questions I hope someone who fully knows how it works can help.

1. If my company calendar year is July to June. Do I need to have the company accounts empty by June to avoid paying tax on anything in the account?
2. Do I need to pay myself as much as possible and keep as little as possible in the company account.
3. What tax is payable on moneys left in the business account at the end of June?
4. Once moneys are left in the account at the end of June and untouched, can they just be transferred into the next year to pay my salary in year two.
5. Can I leave as much as I want in the business account year after year.

In general, I’d like to keep the business account healthy with as much as I can, then when the rainy day comes, keep paying myself from the business account.

Any ideas?

Calahonda52

its all here:
https://www.revenue.ie/en/companies-and-charities/corporation-tax-for-companies/corporation-tax/close-companies.aspx and the underlying pdfs
.
Are you working from home or commuting to the same location

Prussell2

Many thanks Calahonda52.

Wow those tax documents are a minefield. Hard to know where to begin. My head is heavy.

I think I will need to sit down with an accountant.

Prussell2

Prussell2 wrote: »

Many thanks Calahonda52.

Wow those tax documents are a minefield. Hard to know where to begin. My head is heavy.

I think I will need to sit down with an accountant.

I use an accountancy firm. They handle all the tax for me.

All i do is get my timesheet approved and they do the rest.

Atlantic Dawn

Use an umbrella company, they charge so much a month and look after everything so you are pretty much an employee..
https://www.iconaccounting.ie/

Prussell2

I’m hoping to go down the road of my own company and not an umbrella.

I’m told everyone else I’ll be working with is exactly the same.

I do appreciate the advice though

Prussell2

Prussell2 wrote: »

I’m hoping to go down the road of my own company and not an umbrella.

I’m told everyone else I’ll be working with is exactly the same.

I do appreciate the advice though

Why your own company?

Prussell2

[Deleted User] wrote: »

Why your own company?

I’m hoping to do something a little different in the long run so set it up now and no excuses then.

Prussell2

Prussell2 wrote: »

I’m hoping to do something a little different in the long run so set it up now and no excuses then.

You can do that, you'll just have slightly more initial costs. Id still recommend using an accountants. I use Fenero.

Calahonda52

Atlantic Dawn wrote: »

Use an umbrella company, they charge so much a month and look after everything so you are pretty much an employee..
https://www.iconaccounting.ie/

OP
whats the answer to this
Are you working from home or commuting to the same location.

re
so you are pretty much an employee

pretty much does not do it

Prussell2

Calahonda52 wrote: »

OP
whats the answer to this
Are you working from home or commuting to the same location.

re
so you are pretty much an employee

pretty much does not do it

I will be working in an office 3 days a week and home 2 days. May have to travel from time to time abroad.

Stheno

Prussell2 wrote: »

I will be working in an office 3 days a week and home 2 days. May have to travel from time to time abroad.

In the office of the company you are contracting to?

Will they supply you with stuff like a laptop?

relax carry on

Any of the posts I've seen about IT contractors in the main seem to indicate they are employees not self employed.

Prussell2

Stheno wrote: »

In the office of the company you are contracting to?

Will they supply you with stuff like a laptop?

The company supply me with anything I need to do my job, including hardware, pay for occasion long distance travel.

I obviously will need to get to work myself, etc.

My main question I really want an answer to is as follows:
If my calendar year is July-June. I invoice and bring in for example and I’m round to the nearest 100k!!!! So I invoice for 100k plus vat. I pay myself a salary for the 12 months, vat and All employee taxes are removed, I have 10k left in the account on 30june. Is that 10k taxable as corp tax or can I leave it there and carry it forward to the next year.

Stheno

Prussell2 wrote: »

The company supply me with anything I need to do my job, including hardware, pay for occasion long distance travel.

I obviously will need to get to work myself, etc.

My main question I really want an answer to is as follows:
If my calendar year is July-June. I invoice and bring in for example and I’m round to the nearest 100k!!!! So I invoice for 100k plus vat. I pay myself a salary for the 12 months, vat and All employee taxes are removed, I have 10k left in the account on 30june. Is that 10k taxable as corp tax or can I leave it there and carry it forward to the next year.

Ask an accountant as you've been advised?

Technically if the Revenue audit you, youd be classed as an employee for tax purposes and be in a bit of bother with under payments as a result

barneystinson

Stheno wrote: »

Ask an accountant as you've been advised?

Technically if the Revenue audit you, youd be classed as an employee for tax purposes and be in a bit of bother with under payments as a result

The OP is talking about trading through a Ltd company, and they certainly are an employee alright, of their own company and drawing a taxed salary, so I’m not sure where you’re seeing the issue?

The company paying for the OP’s services, has a contract with the OP’s company, not with the OP. Revenue have not and do not attempt to look through such arrangements. It’s different in the UK where they have IR35 legislation.

s8n

I can recommend Fenero, they make it VERY easy
https://www.fenero.ie/

sportsfan90

I use ContractingPlus. They offer a similar service and look after invoices, tax returns etc. Uploading timesheets & expenses is very easy using their app.

barneystinson

sportsfan90 wrote: »

I use ContractingPlus. They offer a similar service and look after invoices, tax returns etc. Uploading timesheets & expenses is very easy using their app.

What sort of expenses are the norm these days?

barneystinson

barneystinson wrote: »

The OP is talking about trading through a Ltd company, and they certainly are an employee alright, of their own company and drawing a taxed salary, so I’m not sure where you’re seeing the issue?
.

Thats exactly what I do and Fenero take care of all the tax stuff with the exception of my end of year tax return, which is a form I fill out.

He needs to go and talk to one of these such companies but i think he's way over thinking things.

Edit: Fenero even remind me when to do it and provide me with the link to the form.

retalivity

You said you are starting contracting but its not amazing money, in that sense do not set up your own company - use an umbrella service for a few months and feel it out. Initial setup costs can be high and the benefits of your own company vs umbrella are negligible if youre on a low rate and are unsure on security, contract lengths etc.
Afaik any money left in the company at the end of the tax year is subject to corporation tax (12.5%), hence i max out my pension/pay myself as much as possible each year, and leave as little as possible in the business acc. Some ppl do it then other way, its a personal thing.
Look at any of the options listed already and contact them for more correct financial advice - i would not recommend diving straight into a ltd company immediately.

(Full disclosure : contracting 7yrs - 2 as umbrella employee, 2 as umbrella director, 3 with ltd co)

Calahonda52

Prussell2 wrote: »

The company supply me with anything I need to do my job, including hardware, pay for occasion long distance travel.

I obviously will need to get to work myself, etc.

My main question I really want an answer to is as follows:
If my calendar year is July-June. I invoice and bring in for example and I’m round to the nearest 100k!!!! So I invoice for 100k plus vat. I pay myself a salary for the 12 months, vat and All employee taxes are removed, I have 10k left in the account on 30june. Is that 10k taxable as corp tax or can I leave it there and carry it forward to the next year.

yes, and if you leave it in the company for 18 months you pay another skelp of tax. the detail ins in the pdfs in the first link I sent you
http://www.taxfind.ie/binaryDocument//pdfs/http___www_revenue_ie_en_about_foi_s16_income_tax_capital_gains_tax_corporation_tax_part_13_13_02_05_pdf.pdf

the other concern I have is that you might start charging mileage to/from the office as you are not an employee of the office.

In passing I disagree with the notion that the Ltd is expensive to set up etc.
I see these umbrella companies as leeches sucking the rewards of the sweet of your brow, same as outfits like CPL and agency workers, again naked exploitation of the labouring man, or similar.

Whats the take, 15% of gross?

Marcusm

Calahonda52 wrote: »

yes, and if you leave it in the company for 18 months you pay another skelp of tax. the detail ins in the pdfs in the first link I sent you
http://www.taxfind.ie/binaryDocument//pdfs/http___www_revenue_ie_en_about_foi_s16_income_tax_capital_gains_tax_corporation_tax_part_13_13_02_05_pdf.pdf

the other concern I have is that you might start charging mileage to/from the office as you are not an employee of the office.

In passing I disagree with the notion that the Ltd is expensive to set up etc.
I see these umbrella companies as leeches sucking the rewards of the sweet of your brow, same as outfits like CPL and agency workers, again naked exploitation of the labouring man, or similar.

Whats the take, 15% of gross?

That’s two different markets; Fenero, ContractingPlus etc each charge fixed fees which will range from €150-250 per month depending on whether umbrella or own ltd company including invoicing, payroll, VAT returns, financial Statements, CRO returns and personal income tax. It’s an effective outsourcing arrangement and need not be excessively costly.

icanmunch

Set yourself up with a company like icon accounting. I no longer contract but when I did, icon had me setup as a director, which meant I could expense any items that I could deem necessary for my role, mobile phones, bills, internet if working from home etc. you can even expense the fee that the firm charge. It’s very straight forward to setup and requires very little of your time month on month, just submit timesheets and expense receipts and you’re good to go

Calahonda52

icanmunch wrote: »

Set yourself up with a company like icon accounting. I no longer contract but when I did, icon had me setup as a director, which meant I could expense any items that I could deem necessary for my role, mobile phones, bills, internet if working from home etc. you can even expense the fee that the firm charge. It’s very straight forward to setup and requires very little of your time month on month, just submit timesheets and expense receipts and you’re good to go

Lets explode this expensing bs
Yes you can expense, but at 12.5% tax its hardly a must have, when looked at in terms of the onerous requirements of being a director of a close company.
.

td2008

It generally makes no sense leaving any money in the company. You will need to pay corporation tax of 12.5% plus the professional surcharge of 20% and even then if you take the money out as wages the next year pay normal paye on top of that. The most tax efficient way is to lump it into a pension.

Marcusm

Calahonda52 wrote: »

Lets explode this expensing bs
Yes you can expense, but at 12.5% tax its hardly a must have, when looked at in terms of the onerous requirements of being a director of a close company.
.

I think the point would be that you would usually settle the mobile phone and internet bills out of your post tax PAYE income whereas this way you would pay from gross receiptsof the company and seert that there's no BIK as any personal use is merely incidental. it's not an approach which I take . but it is common for contractors.

Funny thing sos that 20-30 years ago there was a standard BUIK charge on an employer provided mobile phone but it is all gone by the wayside provided the phone is provided primarily for use in the employment.

J.Ryan

Marcusm wrote: »

That’s two different markets; Fenero, ContractingPlus etc each charge fixed fees which will range from €150-250 per month depending on whether umbrella or own ltd company including invoicing, payroll, VAT returns, financial Statements, CRO returns and personal income tax. It’s an effective outsourcing arrangement and need not be excessively costly.

For that level of work, its over charging

Calahonda52

J.Ryan wrote: »

For that level of work, its over charging

My sentiment entirely as expressed earlier in this
thread

Marcusm

Calahonda52 wrote: »

My sentiment entirely as expressed earlier in this
thread

Actually, what you suggested earlier was that they took 15% of the gross. The actual monthly charges are a small fraction of that.

MegamanBoo

Hi, sorry if I'm slightly hijacking this thread. I'm about to start IT contracting and have been put in touch with two firms.

Both are offering me a solution where I'd be an employee of an umbrella company but one is offering an option where I'd be the director of a child company under the umbrella company.

This is giving me a little more take home pay but the other firm is basically saying it's a little dodgy and revenue are clamping down on this sort of thing.

Has anyone ever heard of this "sub-director" solution? Is it above board?

Calahonda52

why is the child company option giving you more take home pay?
The revenue clampdown is a smoke screen: exactly what sort of thing?

un5byh7sqpd2x0

Calahonda52 wrote: »

why is the child company option giving you more take home pay?
The revenue clampdown is a smoke screen: exactly what sort of thing?

No employer PRSI is why, there’s nothing dodgy about being a director or an umbrella company.

MegamanBoo

Calahonda52 wrote: »

The revenue clampdown is a smoke screen: exactly what sort of thing?

I've just double checked and basically I'd be joining an existing company as a director/shareholder.

And yes it looks like the savings come on employer prsi

Calahonda52

Brenda Rancid Topaz wrote: »

No employer PRSI is why, there’s nothing dodgy about being a director or an umbrella company.

None or reduced?
https://www.robertsnathan.com/payeprsi-key-points-note-company-directors-self-employed/
3. PRSI for Company Directors

Another important factor to consider as a company director is Employer’s PRSI. The rules surrounding the application of a PRSI class on salaries paid to directors are not as clear as they are for PAYE. Under Section 16 of the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, proprietary directors who own or control 50% or more of the shareholding of a company, whether directly or indirectly, are subject to PRSI under Class S, which is currently 4% of gross income.

The PRSI Class applicable to proprietary directors owning or controlling less than 50% of the shareholding of a company, is determined on a case by case basis, by the Scope Section of the Department of Social Protection.

As Class S employments are not subject to Employer’s PRSI, which can be charged at either 8.5% or 10.75%, (as at 15th January 2015), there is a significant saving for companies on salaries paid to directors under PRSI Class S.


What State pension comes with Class S?

un5byh7sqpd2x0

Calahonda52 wrote: »

None or reduced?
https://www.robertsnathan.com/payeprsi-key-points-note-company-directors-self-employed/
3. PRSI for Company Directors

Another important factor to consider as a company director is Employer’s PRSI. The rules surrounding the application of a PRSI class on salaries paid to directors are not as clear as they are for PAYE. Under Section 16 of the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, proprietary directors who own or control 50% or more of the shareholding of a company, whether directly or indirectly, are subject to PRSI under Class S, which is currently 4% of gross income.

The PRSI Class applicable to proprietary directors owning or controlling less than 50% of the shareholding of a company, is determined on a case by case basis, by the Scope Section of the Department of Social Protection.

As Class S employments are not subject to Employer’s PRSI, which can be charged at either 8.5% or 10.75%, (as at 15th January 2015), there is a significant saving for companies on salaries paid to directors under PRSI Class S.


What State pension comes with Class S?

No employers PRSI. Zero. Nada. Not reduced, but none at all. 0%. It’s in the last paragraph of your quote.

State pension on Class S PRSI is the full regular amount.

Calahonda52

DM, Thanks for this!
Where is the catch?

un5byh7sqpd2x0

Calahonda52 wrote: »

DM, Thanks for this!
Where is the catch?

Job security?

retalivity

Calahonda52 wrote: »

DM, Thanks for this!
Where is the catch?

There used to be something about not getting the dole if you were an umbrella director and between contracts - you could claim it if you were an umbrella employee. Think that may have changed in recent years with legislation

Calahonda52

retalivity wrote: »

There used to be something about not getting the dole if you were an umbrella director and between contracts - you could claim it if you were an umbrella employee. Think that may have changed in recent years with legislation

Looks correct

Class S contributions only cover you for a limited number of payments. In general, they do not cover you for any short-term payments including illness and disability payments. If you satisfy all the other conditions, Class S contributions can entitle you to:

Maternity Benefit
Adoptive Benefit
Paternity Benefit
Parent's Benefit
Widow's, Widower's or Surviving Civil Partner's (Contributory) Pension
State Pension (Contributory)
Treatment Benefit Scheme
Invalidity Pension
Jobseeker's Benefit (Self-Employed)
Guardian's Payment (Contributory)

My question was why would the system allow you pay no PRSI and still get nearly the full range of state benefits?

WacoKid

My 2 cents:

Set up your own company and business bank accounts
Hire an accountant to do your payslips and end of year accounts only
Do everything lese yourself on www.ros.ie (PAYE, VAT), takes a few mins every few months
Nobody else can touch or see your money, or your accounts
Gives you greatest flexibility with your money