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IT contracting and tax advice

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  • 30-05-2020 10:32am
    #1
    Prussell2
    Registered Users Posts: 9 ✭


    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?


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    #2
    Calahonda52
    Registered Users Posts: 12,217 ✭✭✭✭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

    “I can’t pay my staff or mortgage with instagram likes”.



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    #3
    Prussell2
    Registered Users Posts: 9 ✭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.


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    #4
    [Deleted User]
    Posts: 11,614 ✭ [Deleted User]


    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.


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    #5
    Atlantic Dawn
    Registered Users Posts: 81,312 ✭✭✭✭Atlantic Dawn
    M


    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/


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    #6
    Prussell2
    Registered Users Posts: 9 ✭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


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    #7
    [Deleted User]
    Posts: 11,614 ✭ [Deleted User]


    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?


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    #8
    Prussell2
    Registered Users Posts: 9 ✭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.


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    #9
    [Deleted User]
    Posts: 11,614 ✭ [Deleted User]


    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.


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    #10
    Calahonda52
    Registered Users Posts: 12,217 ✭✭✭✭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

    “I can’t pay my staff or mortgage with instagram likes”.



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    #11
    Prussell2
    Registered Users Posts: 9 ✭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.


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    #12
    Stheno
    Moderators, Business & Finance Moderators, Science, Health & Environment Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 51,687 Mod ✭✭✭✭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?


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    #13
    relax carry on
    Registered Users Posts: 4,072 ✭✭✭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.


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    #14
    Prussell2
    Registered Users Posts: 9 ✭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.


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    #15
    Stheno
    Moderators, Business & Finance Moderators, Science, Health & Environment Moderators, Social & Fun Moderators, Society & Culture Moderators Posts: 51,687 Mod ✭✭✭✭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


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    #16
    barneystinson
    Registered Users Posts: 4,683 ✭✭✭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.


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    #17
    s8n
    Registered Users Posts: 3,833 ✭✭✭s8n


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


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    #18
    sportsfan90
    Registered Users Posts: 604 ✭✭✭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.


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    #19
    barneystinson
    Registered Users Posts: 4,683 ✭✭✭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?


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    #20
    [Deleted User]
    Posts: 11,614 ✭ [Deleted User]


    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.


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    #21
    retalivity
    Registered Users Posts: 14,046 ✭✭✭✭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)


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    #22
    Calahonda52
    Registered Users Posts: 12,217 ✭✭✭✭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?

    “I can’t pay my staff or mortgage with instagram likes”.



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    #23
    Marcusm
    Registered Users Posts: 10,215 ✭✭✭✭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.


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    #24
    icanmunch
    Registered Users Posts: 156 ✭✭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


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    #25
    Calahonda52
    Registered Users Posts: 12,217 ✭✭✭✭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.
    .

    “I can’t pay my staff or mortgage with instagram likes”.



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    #26
    td2008
    Registered Users Posts: 478 ✭✭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.


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    #27
    Marcusm
    Registered Users Posts: 10,215 ✭✭✭✭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.


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    #28
    J.Ryan
    Registered Users Posts: 474 ✭✭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


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    #29
    Calahonda52
    Registered Users Posts: 12,217 ✭✭✭✭Calahonda52


    J.Ryan wrote: »
    For that level of work, its over charging

    My sentiment entirely as expressed earlier in this
    thread

    “I can’t pay my staff or mortgage with instagram likes”.



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    #30
    Marcusm
    Registered Users Posts: 10,215 ✭✭✭✭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.


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    #31
    MegamanBoo
    Registered Users Posts: 2,177 ✭✭✭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?


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