PAYE or end of year

S

States

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I have a question about how I should pay my taxes.

I am working as a contractor and have a limited company. I've set myself up as an employee of the company and am wondering do I have to pay my PAYE and PRSI on a monthly basis or can I pay this at the end of the year.

Can someone explain how this works?
Thanks
 
It depends on when the Company itself returns its P30. This is usually monthly. There used to be an annual return for small companies, does this apply?

The P30 is where the employer accounts for both employer and employee PRSI and employee tax deducted. What gets deducted in turn depends on your personal situation.
 
Can you choose to return the P30 monthly or annually?

I'm just thinking that I can invest the money I would pay monthly in tax and then pay the tax at the end of the year rather than giving the money to the taxman up front.
 
States,

I don't think you can pay it annualy. I certainly pay mine monthly.

As a sole trader your income tax would be once a year, but that since I switched to a Ltd Company I actually prefer the fact that the Income tax bill is spread over the year.

Whatever minimal amount I might earn per year, is unlikely to make it worth my while. Any investment with any prospect of a return is likely to have an element of risk.

In my own case It certainly wouldn't make sense, I'd be talking about a Monthly PAYE/PRSI payment of less than €400. I'd need an investment vehicle that would allow monthly contributions and an annual withdrawal. Then you'd have tax on the interest earned. I think there's an additional levy on the proceeds of investments like this.

All in all it seems like too much work for too little return.

Unless of course you pay yourself a very very high salary. In which case I suspect you should be looking at other tax planning measures.

Hope this helps.

-Rd
 
A small company can opt to become an annual remitter for paye/prsi purposes by sending a faxed request to the collector general on 061-488673, the CG will either approve or reject the request based on a number of factors including whether or not the company is tax compliant etc.

The optimum setup for paye/prsi payment is a monthly direct debit with revenue, it is not neccessary to submit the monthly P30 when the DD is in place thus reducing administration, and the effect of taxation on the companys cashflow is more accurately reflected.


I hope this helps,

regards,

Ikeano
 
May thanks for your help.

I was hoping to put the money that's in my company current account (earning nothing) into a Rabobank account (@3% minus Dirt) which would at least give me some return....rather than paying montly to revenue.

Also with a Direct Debit how to take account of expenses? Expenses may well vary from month to month so what is the best way to account for these?
 
>>Also with a Direct Debit how to take account of expenses? Expenses may well vary >>from month to month so what is the best way to account for these?

Expenses should have no impact on your P30.
I pay myself the same salary each month.

I separately list my expenses for the month and file them. And I get my expenses separately from my Salary (The might be lodged at the same time, but my Salary is always the same, only the expenese change).

You don't pay any tax on legitimate expenses so there's no PAYE/PRSI implications. The P30 return only relates to the Salary, which is constant.

-Rd
 
Of course that is true (wasn't thinking straight!). I've started paying VAT using the ROS system so I am going to use that for tax also to set up the DD.

One other question - as my wife is a Director of the company but also has a full time job as a PAYE employee, are there expenses she can claim so you think?
 
How does a monthly direct debit work if you're not sure of your revenue for the year?

There's no way that most contractors can know EXACTLY how much they are going to earn in a year.


Can you make a final adjustment?
 
PJM,

You can pay your direct debit through out the year, at the year end when your P35 return, which includes all totals for the year, gross salary, paye and prsi deductions is completed, you then pay the balance of you liability or receive a refund of any overpayment.

You should base your direct debit on a reasonable amount of wages per month, ie if you normally take € 2000 from the company base your dd on the amount of tax and prsi which is liable on this figure, minor variations during the year will not have a huge impact on your final liability.

If your dd is reasonable you should have a significant portion of your liability paid prior to the year end.

Regards,

Ikeano
 
How does a monthly direct debit work if you're not sure of your revenue for the year?
There's no way that most contractors can know EXACTLY how much they are going to earn in a year.
Click to expand...

If the contractor is working through a limited company they can decide exectly how much to draw out as salary. So the monthly P30 payment should be easily predicted and can stay the same for the entire year.

Obviously things can change. If you prediced 50K in revenue and budgeted to pay yourself almost all of it in salary then you could come up short. But if you budget to only pay 25K or 30K in salary then you should have pleanty to cover the expected salary and any downtime you weren't expecting.

If you are doing this and running large profits you should look at ways of avoiding tax on those profits.

-Rd
 
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