contract Day rate Full time employment vs contracting.

vmware

currently in full time employment, but looking at options to go into a full time contract role with a new company

im just wondering on how much tax i'll have to pay and also what would I be entited to claim , exmaple, power, broadband, mobile, etc

I know I wont have holiday pay or a pension or sick leave,

what are the pros and cons of contracting

Thanks

wandererz

Google the Icon Accounting tax calculator.

Input your daily rate. Generally put in 18 working days to account for bank Holidays, time off etc.

You can claim all of the above up to certain limits.

I on charges a low enough monthly fee to process your payroll etc.

vmware

I assume diesel and runnign costs of car also allowed? could I emply my wife part time to carry out book keeping etc

Bigmac1euro

Yes

you will need to setup your own business and run it that way. Business bank account and pay yourself your wages from it. You can also pay your wife to manage the books from the business account.

Also as she’s an employee you can also benefit from 2x500 euro gift vouchers per year (handy at Christmas)

I actually kind of miss contracting. I didn’t setup my own business I hired a company (contracting plus) to manage my taxes and I was setup as a PAYE employee of an umbrella company but if I was contracting again I’d go the other way and pay my own taxes and setup my own business as there is ways you can avoid taxes etc.

vmware

thanks sounds interesting these umbrella companies charge alot and possible more to benefit if you go as a solo trader?

https://www.boards.ie/discussion/comment/119093256#Comment_119093256

If you're a sole trader you can't employ your wife. You need to be a limited company to do that. You can do your own limited company set up rather than going down the umbrella company route.

vmware

there 2 options as

staff 60k

contractor 70k

what are the pro and cons of each ?

Bigmac1euro

https://www.boards.ie/discussion/comment/119093273#Comment_119093273

This is correct.

vmware

are there pros and cons of solo trader vs limited

https://www.boards.ie/discussion/comment/119093319#Comment_119093319

Ltd Co- employ spouse, can often make larger pension contributions. However you've to file an income tax return and Corporation Tax Return with Revenue and B1 Annual Return to the CRO.

Sole trader only files an income tax return. Has no limited liability but shouldn't be an issue in your field. Can't employ spouse/family. Pension contributions are limited to a % of your income (depending on your age).

Mrs OBumble

https://www.boards.ie/discussion/comment/119093297#Comment_119093297

That's not nearly enough difference between the two to make the extra hassle worthwhile, IMHO.

As a contractor, if you want equivalent to employee minimum rights you need an extra 11% to pay for the employer PRSI, 8% to pay yourself for annual leave, just under 4% to pay yourself for bank holidays. Plus whatever it takes to cover the cost of administering this, and also and training / development you need to keep current for the job. So an absolute minimum of 22% extra, realistically some more.

22% of 60k = 13k.

Oh - and you need professional liability insurance. Even if you aren't incompetent, all it would take is for a large company with in house lawyers to take a swipe at you, and if you are uninsured you could lose your house etc.

https://www.boards.ie/discussion/comment/119093398#Comment_119093398

Class S PRSI for a company director doesn't incur any employers PRSI

mrslancaster

Sole traders may have employees.

Royale with Cheese

https://www.boards.ie/discussion/comment/119093297#Comment_119093297

I'd want to be looking at a contract rate equivalent to 80-90k a year after holidays to think about that really. If you setup a limited company there are overheads of running that per year, it's costing me around 3k currently. Is the 60k just the base salary? Would there be a bonus, pension contributions, health insurance, stock options etc? There is a possible recession coming too, maybe not a great time to be moving into contracting either. I've heard anecdotal evidence of revenue cracking down on one man companies employing their spouse to do nothing too.

Car99

I'd take the staff 60k out of those two options . If you had to go down contractor route 70k sole trader would be the better option.

ahnowbrowncow

https://www.boards.ie/discussion/comment/119093186#Comment_119093186

As a sole trader, diesel costs and car maintenance are not allowable if they are incurred when travelling between home and your normal place of work i.e your commute to work.

As a limited company, if this is claimed as an expense it would then be treated as benefit in kind. Expenses relating to travel to a temporary place of work are allowed to be claimed.

Ash.J.Williams

https://www.boards.ie/discussion/comment/119093186#Comment_119093186

No , the government treat you like an employee, they know you’re onsite working as an employee and employee mileage and expenses apply. However if you work away from the office you can claim mileage minus distance to office .

Mrs OBumble

https://www.boards.ie/discussion/comment/119093406#Comment_119093406

Correct. But it only gets you a class-S "stamp". So it counts towards eligibility for Maternity Benefit and pension, and not a lot else.

If the poster wants to keep their eligibility for all welfare benefits (eg in case they get sick or the work dries up), they need class A paid. And that will cost the employer-contribution rate, no matter whether it's done thru an umbrella company or a sole trader voluntarily paying class A. (I'm told the latter is possible, but have never found out how to actually do it).

Also, as a contractor, if the work dries up or the company is sold, you get no redundancy or TUPE rights. You can be dumped out with little warning, and no compensation. The contract rate needs to be high enough to make it worth taking this risk. The more I think about this (with the economy heading into a recession), an extra 10k for contracting is just insulting.

CPTM

An extra 10k for contracting is laughable. Typically it's double or close to it. In the IT world a business analyst role would be about 65 to 75k, and contracting 500 to 550 a day which is about 120 to 130k per annum.

I would imagine sole trader isn't an option for you. For example in the IT world, the clients want invoices issued under LTD or umbrella companies. But maybe you're in a completely different field that allows that.

Pension contributions can be way way higher as well, in the self employed world.

There are some benefits to contracting, but generally it's the cash that is the main benefit. If you're not seeing that, stay permanent.

vmware

take the staff job so is what im hearing?

vmware

less say I was getting 500 a day and worked 48 weels in the year, that would b €120k for the year.

cani then setup as a ltd company and claim mileage to work

mobile

broadband

esb

heating etc?

also can I pay into pension ?? to reduce my tax, and how am i fixed with prsi etc to ensure I still get the state pension in time

https://www.boards.ie/discussion/comment/119236914#Comment_119236914

Yes you can set up a Ltd Co. Your company would then employ you (and you can pay employers PRSI to cover your PRSI query).

The company can then make executive/directors pension contributions which will qualify as a tax deductible expense for the business.

Your company could pay you the €3.20 work from home allowance free of tax, that covers your heating/broadband query. Company can also pay for a mobile.

Mileage would be based on civil service rates but can't be claimed for a commute (also if you're working from home then no mileage).

vmware

am i better off as LTD or Solo trader? what are the pros and cons.

will be a mix of on site / working from Home.

just would like to max what I can claim for expenses etc is €500 a day a good rate?

I assume no need to register for VAT, as as such wnt be buying much ??

https://www.boards.ie/discussion/comment/119237005#Comment_119237005

You'll be providing a service and earning over €37,500 so you would have to register for VAT.

Ltd Co pros - higher pension contributions than a sole trader

Ltd Co cons - must file Corporation Tax return and Annual Return to CRO as well as income tax return. Therefore extra bureaucracy and cost.

CPTM

https://www.boards.ie/discussion/comment/119237005#Comment_119237005

You can double check but I'd be fairly sure they won't take sole traders. Day rate contracting jobs tend to require a ltd company or umbrella company through the likes of Icon accounting.

You can get a 500 euro gift voucher tax free which is nice. Also your office set up at home like laptop, printer, blinds, chairs, desks,keyboards,screens etc are all expense-able.

500 is decent, expecially if you can do a half day over time here and there.

https://www.boards.ie/discussion/comment/119237142#Comment_119237142

And kites being flown about raising this limit to €1,000 which will be even nicer again. If you have a Ltd Co you could also employ your spouse to assist with your admin, which may be beneficial depending on their income.

CPTM

https://www.boards.ie/discussion/comment/119237229#Comment_119237229

Very good I didn't know that. I must keep an eye out for any changes.

Fr Tod Umptious

Hi OP

lf it's your first time going down this route I would really advise going the umbrella route using someone like Contracting Plus or as others suggested Icon.

They really do take all the hassle out of it and you still get many of the tax benefits.

Once you find your feet in the contracting world you could go it alone.

vmware

what does this mean?

And kites being flown about raising this limit to €1,000 which will be even nicer again. If you have a Ltd Co you could also employ your spouse to assist with your admin, which may be beneficial depending on their income

https://www.boards.ie/discussion/comment/119237598#Comment_119237598

https://www.boards.ie/discussion/comment/119093297#Comment_119093297

Not enough difference to make it worth while. You'd need approx. 30% difference to make it so.

vmware

with pension i can only contribute myself so will loose the company matching what I put in . but not so bad

relax carry on

Just on expensing everything which seems to crop up quite a bit with these questions. The expenses incurred must be real and wholly, necessarily and exclusively incurred for your business activities to be allowable.

CPTM

https://www.boards.ie/discussion/comment/119238456#Comment_119238456

I think they've come back since the post you quoted, now saying there's another rate on the table (500 a month).. see below..

https://www.boards.ie/discussion/comment/119237005#Comment_119237005

vmware

https://www.boards.ie/discussion/comment/119240659#Comment_119240659

correct day rate of 500

https://www.boards.ie/discussion/comment/119240659#Comment_119240659

Go talk to someone like Fenero who will give you your options.

CPTM

https://www.boards.ie/discussion/comment/119240754#Comment_119240754

500 is worth it in my opinion especially if there is scope for a bit of over time and the company has a good reputation for flexible working hours. Check glassdoor for company reviews.

CPTM

https://www.boards.ie/discussion/comment/119240880#Comment_119240880

Yes Fenero or Icon. Both are great apparently.

vmware

gone down the PLC ltd company option, some very good tax saving can be done

1 person pension plans are being stopped under new EU law, might make a huge difference to anyone thinking of setting up a Limited Company.

Tow

The pension plans are not actually being stopped by the change. They just have to be audited. The fear is the cost of the audits make them unviable.

vmware

good to know thanks !

vmware

also If I decide to take only 40 % of my monthly invoice, and leave the rest in the company account / pay into a pension, do I need someone to do up a pay slip so I get paid?? or can I do this myself?? is there online payroll systems??

vmware

any more advise on becoming a contractor?

CPTM

Definitely get an accountant or work with the likes of Icon accounting or the others that were mentioned previously. It sounds like you are looking to save money on the bookkeeping and accounting by doing it yourself but if you're asking these kind of questions you are quite a way from having enough of an understanding of it. The penalty for getting this wrong can be disastrous.

ari101

At 70k v 60k I'd take the employee route every time. Maybe at 80+ it's worth it.

I know someone who did umbrella company for the first contract (>100k) and switched to proper limited company after that. They used Icon for both umbrella and now ltd and have been pretty happy with fee/value for money. I don't remember exactly what this person is paying, but (as an accountant in practice) I remember thinking it wasn't bad value for the expertise, hassle free service and the financial advice perks available.

I'd be in favour of the suggestion to go umbrella and if it works out switch to LTD. If you have big money to spare that you are willing to lock up in a pension, a LTD with a proper Director's Pension can be more tax efficient.

SimpleDimple

https://www.boards.ie/discussion/comment/119347153#Comment_119347153

You have to get your books audited (not sure if audited is the right word?) once a year by an accountant.

When I went contacting I did it all through contacting plus (they set up my company bank account, Ltd company, insurance and everything), and they charge a fairly low monthly fee for this.

the cost of getting my books audited by an accountant if I was to do all that myself wouldn’t be a lot cheaper than what contacting plus charge

also you need to pay corporation tax on any profits in your company bank account at the end of the year (units you ear mark them for wages in the next 6 months)

SureYWouldntYa

https://www.boards.ie/discussion/comment/119360117#Comment_119360117

Audited wouldn't be the right term. They would check to make sure you're doing things right, ie you're not buying a suit in Louis Copeland and claiming it as a business expense, or claiming VAT on your weekly Tesco shop, but it wouldn't be an audit

It's a self assessment system with Revenue, you can put down anything you like and pick numbers from out of the sky if you wish, but an accountant or tax advisor wont put their name to it if its not right should there be a Revenue query or audit down the line.

Your point on corporation tax is a bit wrong, i don't know where you picked up on earmarking 6 months wages to not pay tax but that's not what would happen, and with PAYE modernisation you could really only accrue for actual declared wages unpaid at year end, falsely accruing for wages or other costs would just catch up on you in the end in any case

SimpleDimple

https://www.boards.ie/discussion/comment/119368012#Comment_119368012

I might have been a bit loose with my choice of words.

It might be better to say that all the profits my company generates go towards paying my wages and only that (once the monthly expenses of fees, pension, insurance etc. are taken away), so if there is money left in there at the end of the year it’s because I haven’t gotten around to paying myself yet. So any “profits” the company has are in fact unpaid remuneration, and are “deductible as an expense in computing the profits for the accounting period”. - Part 42-04-23 of the tax and duty manual

I got the 6 months figure from contacting plus, where they got it from I couldn’t tell you.

… I’m also stretching the limits of my tax understanding here, so you might have a point on how you talk about accrual, I don’t know

ari101

I believe the rule is that accrued remuneration must be paid within 6 months of year end to be tax deductible in that financial year. (I can't site a quotable source, but I have applied this rule for a client before under the direction of someone with a lot more tax knowledge than I 😁)