I.T. Contracting and Taxation

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BOC_ARDEE

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Hi folks,

Ive been I.T. Contracting now for about 2 years and am having serious difficulty understanding what expenses I am entitled to. There are a few dedicated IT Contracting accountants but the information they give is very varied.

For instance,

My current account says that I can claim subsistence as I work away from home for over 10 hours. I think it works out at €16 a day, along with that I am claiming around €20 a week in mobile bills, also mileage expenses.

The problem is that I have a normal "fixed" place of work so am I still able to claim such expenses?. Are there any places that you can go to get good solid information on annual expenses, what I can claim, what I cant. The % of costs.

I have read thorugh a lot of the revenue.ie documentation though Im none the wiser. Has anyone out there got experience at this?.

Would be grateful for any info...

Regards,
Barry.
 
I use CxC in Cork.
cXc Consultants Exchange Limited

And following the threads here, "oh its so expensive to use such companies", if u are in IT leave a/c and such to a/c experts same as IT expect a/c people turn on PC and use it not necessary to understand it, or develop it or fix it.

On expenses at minimum
1/6 house heating and esb
1/6 home insurance
1/6 home phone
all mobile phone
all professional; fees ie Institute memberships
all postage and stationery
Business travel, taxies, travel cards
Business equipment- lap top, digi cam what ever is relevant to profession
Conferences
Education fees
Cost of using contractor management company( CxC is 5% of invoiced hours or 300euro per month max, plus u don’t work , u don’t invoice , they don’t charge)

re travel
You are not paid to travel to and from your office.
You do claim expenses for your home office

civil service rate's apply first 6000km 72cent per km 2l car, over 6000km 36cent per km
over 5 hours on site 16euro subsistence
over 10hours 40 euro subsistence
over night allowance 140 euro
Travel record to be maintained purpose of trip, who u met
Subsistence is un-vouchered / reciepts not needed
Obviously all other expenses need receipts.

With proper record keeping you should be able to retain 80%plus of gross.
PM me for more info
best of luck
 
Kerak,

Excellent info many thanks, I am using Prima Management in Dublin though they are a bit vaugue on what can be claimed. Had the option to go with CXC though opted against it as they were based in Cork...

Just on subsistence, do we qualify for subsistence claims?. Does "onsite" include your normal place of work?. Or just when you leave your normal place of work to go to a customer site?.

I also work a mixture of nights and day shifts x 12 hours, how do I apply subsistence in this instance?.

Again many thanks for the info, very much appreciated!

Regards,
Barry.
 
Kerak said:
CxC is 5% of invoiced hours or 300euro per month max
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They would want to be very good at what they do. My accountancy fees last year were €850 total. That was basically for end-of-year accounts. It's not difficult to do your own tax/vat/expenses using a spreadsheet and revenue online services.
 
capall said:
Retain 80% plus of gross ?

Are you joking ?
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Perfectly and legally doable. I've been contracting for eight years and have never retained less than 75%. All my accounts and tax returns are prepared by my accountants, who are satisfied I and my company are fully tax-compliant.
 
gonk said:
Perfectly and legally doable. I've been contracting for eight years and have never retained less than 75%. All my accounts and tax returns are prepared by my accountants, who are satisfied I and my company are fully tax-compliant.
Click to expand...

Would this be through the use of a pension if you don't mind me asking?
 
If you are retaining 80% + ,it begs the question what are you living on ?

Other than pension ,an IT Contractors tax deductible expenses are generally minimal except when they have large travel expenses
 
capall said:
Other than pension ,an IT Contractors tax deductible expenses are generally minimal except when they have large travel expenses
Click to expand...

Without going into detail on my personal situation, some allowable items could include:
  • mobile phone
  • education & training
  • home computer & broadband, if you have a home office
  • associated software costs
  • 1/3 of household light, heat & fixed line phone costs, if you have a home office
  • journals, magazines & newspapers
  • non-cash benefit of up to €250 annually (I usually give myself a gift voucher at Christmas!)
  • accountancy & bookkeeping charges
  • taxis, where needed for work
  • meals, where working outside normal office hours
On travel, a light commercial vehicle is treated much more favourably from a BIK point of view than a private car. If it suits your situation, you can claim VAT back on the purchase price, expense all the running costs, and if it's diesel, claim VAT back on fuel. The BIK payable would be a small fraction of the running costs and depreciation borne by the business.
 
Note I said could be allowable. Of course anyone contracting should get professional advice relevant to their specific circumstances.

On magazines & newspapers, here's what the Revenue says

[broken link removed]

"Provision of newspapers, periodicals etc.
Where an employer provides employees with free
periodicals, newspapers etc. which are generally
related to the employer’s business a taxable benefit will
not be treated as arising."

Why do you think this is iffy?

The €250 voucher comes under the small benefit exemption scheme. See this thread: http://www.askaboutmoney.com/showthread.php?t=18095

As for the light, heat & phone, my accountants are specialists in the IT contractor area and I'm happy they have a good handle on what's allowable. Why do you think it's iffy?
​
 
I think you are confusing the rules regarding tax-free benefits to employees with the rules governing allowable deductions for trading companies.
 
ubiquitous said:
I think you are confusing the rules regarding tax-free benefits to employees with the rules governing allowable deductions for trading companies.
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No I'm not. My business is set up as a limited company. I'm a propietary director and the company pays me a salary subject to PAYE in the normal way. Any allowable expenses my company incurs are obviously subject neither to corporation tax in the company's hands nor income tax in my hands. Tax-free benefits provided by my company to me clearly reduce my personal and my company's final tax bills.
 
I would agree that most of these expenses are fine
Broadband,mobile phone,training,relevant magasines,books ,subs
But these are real expenses you have incurred and over a whole year will only amout to a couple of thousand euros
If you are an IT contractor invoicing 100k a year ,these expenses won't make a significant dent in your taxable income. Also as they are real expenses there is no point incurring expenses needlessly just because they are tax deductible it is still costing you

Also you have to be careful with the house/office situation as you want your home to be still regarded 100% as your PPR
 
Contracting ( not just I.T.) always treated suspiciously by PAYE and self employed.

Usually jealously or sour grapes.

I currently invoicing rates higher than my "manager", but no holidays, share options, sick pay, pension social club etc.

I have to give 4 weeks notice but can be terminated today
We have to make 52 week salary in 46 weeks effort.

But we contractors have made that choice be it forced or by intention.

also

If you manage your own tax and returns even using a private a/c practice rather than a managed contractor company you are in my opinion more likely to be audited

The various management companys depend on their relationship with the Revenue, they keep us on the right side of compliance and the revenue have several thousand clients they need not be to concerned about, our tax and PRSI been paid and affairs kept in order professionally.

I have paid more tax in 6 months contracting that I had in the previous 3 years " self employment", and happy to do so and I was fully compliant as a sole trader as well.

It’s a different world contracting, we talk about contractors’ frame of mind.
Detached from office politics, hate bank holidays, happy to come in early, begrudge going golfing, earn excellent money,very sensitive to the next contract opportunity and I certainly plan and execute my tasks to reach contractors nirvana 40 hours and ½ day on Friday.:)

tks
 
If you manage your own tax and returns even using a private a/c practice rather than a managed contractor company you are in my opinion more likely to be audited
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This is not necessarily a bad thing. My understanding is that managed contractor companies offer very limited opportunity for tax planning, both in terms of expense deductions and issues such as deriving max benefits from company pensions. The opportunities in these areas may more readily be maximised by running one's own limited company as a director. The risk of Revenue Audit is hardly relevant if one is tax-compliant and avoids the temptation of pulling "fast ones". A tax-compliant individual has nothing to fear from a Revenue audit.
 
capall said:
Also you have to be careful with the house/office situation as you want your home to be still regarded 100% as your PPR
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It is my understanding that this is only an issue where you are renting your business space in your PPR. If you are not charging the business rent, there should be no problem.

As for the expenses, all of them are things I would be spending money on anyway. I buy a paper every day, I want broadband at home, etc, etc. Isn't it better to be able to pay for these out of gross rather than nett income?
 
Of course
But my question is what percentage of your income is ending up as taxable income that you have to pay out through Paye/prsi system
 
capall said:
Of course
But my question is what percentage of your income is ending up as taxable income that you have to pay out through Paye/prsi system
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I'll just refer you to my previous post where I stated that since I started contracting I have always retained at least 75% of my gross income after tax and PRSI. You will understand that I would rather not go beyond that in describing my personal circumstances or income level. Suffice it to say that I'm happy that I'm fully tax-compliant and I'm not putting down 50" plasma screens as a business expense!

Beyond what I've already outlined here, the best suggestion I can give any contractor is to get good professional advice on what you can do and just as importantly, what you can't.
 
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