IT Contracting

Pique318

Registered User
Messages
162
Hi all,

What's the common practise for contractors in regard to taxation?
I've heard that there is generally an umbrella company created which 'employs' the contractor and that the salary is paid through this.

So does that make the contractor Self Employed or PAYE ?
I thought that Contracting was a self-employed status ?
Can contractors claim back expenses for travelling to their place of work, buying IT equipment etc as part of a tax return ?

Can anyone point me in the right direction of information of moving from PAYE to Contract-based employment ?

Thx
PK
 
Contracting is a commercial term for the basis upon which your "employer" is taking you on and doesn't confer any automatic tax status. There are a few options

- PAYE employee, you could be employed on "contract" but still be a PAYE employee of either the client or of the employment agency that place you.
- Sole Trader, you could register with the Revenue as a sole trader, although this isn't to be recommended as the Revenue are actively clamping down on this, it is only suitable for people who are genuinely self employed, ideally with more than one client. If you are working for one client, turning up each day at the same site to carry out your duties, the Revenue will regard you as an Employee and not Self Employed which will lead to problems for you and your "employer".
- Personal Limited Company - have a company setup with you as the owner and director. You would be a PAYE employee of this company and would invoice your client for the services provided.
- Umbrella Company - used by many contractors who don't want to set up their own company. You would become an employee of the umbrella company and that company would deal with all VAT/PAYE/PRSI issues. If using the services of an umbrella company watch out for companies charging on a percentage basis, look for fixed fee arrangements or it could become very expensive!!

Regarding your question on expenses, if you are anything other than a PAYE employee of the client/agency it will be possible for you to claim expenses for business related costs to reduce your tax bill. The cost of travelling to/from work each day is generally not allowable, and the purchase of IT Equipment is more likely to be regarded as Captical Expenditure, i.e. you claim a capital allowance over several years rather than writing it off in one year.

Regards

podowd
www.prima.ie
 
A question for podowd!

I set myself up as a limited company for years ago and have been working as a contractor ever since, usually via recruitment agencies.

I have just come across fixed contracts directly with the client company instead of via the recruitment agency, one of which is abroad in Saudi Arabia. I will probably take up one of these contracts, if offered. Can I still invoice the client using the limited company or will I be a PAYE employee of the client - I'm a bit confused and will I have to shut down the limited company if the latter?

Also, can I claim the permitted exps if in Saudi Arabia?

Regards,
Fac
 
It totally depends on what the client company in Saudi want. If they will enter into a contract with your limited company then you invoice them through your company and continue in the Irish tax system as normal
If you must go directly onto their payroll then obviously the income will be paid to your personal bank account and not into the company bank account.
You dont have to close your ltd company but you still have to file tax returns and cro returns even if income is zero

Even if you pay no tax in Saudi ,depending on the length of your contract if you are still irish tax resident you will have to pay tax on what you earn there in ireland.
 
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