I started working for a company in 2005. I signed a contract stating I was self employed and responsible for my own Tax affairs. Its obvious that My employer did this to avoid paying PRSI, as my job really meant that I was an employee, ie I was working under the control of another, supplied my labour only, received a fixed hourly/weekly/monthly wage, could not sub-contract the work although there was a clause in my contract that said I could which was obviously only put in an attempt to make it look as if I was self employed, as in reality I could not do any sub contracting,I did not supply materials for the job and I did not supply equipment other than the small tools of the trade. In April 2006 I was given a new contract as an employee and started paying tax and PRSI under PAYE. This means that for part of 2006 I was classed as self employed and for the remainder of the year classed as employee. My Question is if I make a Tax return for the part of 2006 that I was supposed to be self employed am I liable to pay PRSI at the self employed rate even though I made contributions for the remainder of the year as an employee? Also If I do not make a return for my supposedly self employed part of 2006 would it be me or my employer who is liable for non payment?
Self employed or PAYE
- Thread starter shane55
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As far as I understand your post, yes, you are liable for income tax, PRSI and levies on you self-employment income.
You would declare this income - and all other income from every source - on Form 11 or 12 (not sure which applies in your case) by Oct 31 of this year. You are obliged to do this.
It is you, and not your employer, who would be liable for the PRSI (employer PRSI contribution is a seperate issue). The good news is that you will pay less PRSI on the self-employment income than you would have paid as an employee.
You can download the ROS offline application and 2006 forms, enter your numbers, and see for yourself the tax implications of this.
You would declare this income - and all other income from every source - on Form 11 or 12 (not sure which applies in your case) by Oct 31 of this year. You are obliged to do this.
It is you, and not your employer, who would be liable for the PRSI (employer PRSI contribution is a seperate issue). The good news is that you will pay less PRSI on the self-employment income than you would have paid as an employee.
You can download the ROS offline application and 2006 forms, enter your numbers, and see for yourself the tax implications of this.
PAYE workers pay up to 7.5% PRSI, including the levies, so I'm not sure about that.
But either way it's irrelevant as you have to pay the 5% PRSI on your self-employed income, you don't have a choice about this. It's true, you don't get much benefit from it - it entitles you to contributory old age pension, bereavement benefit, and maternity leave benefits, I believe - but there's nothing much you can do about this either.
By the way, the reason you were made an employee is probably because the revenue takes a dim view of companies engaging de-facto full-time employees as contractors. This has been rectified by the company, but you're still going to have to make a tax return for the year as you had non-PAYE income. You can pay your PRSI and income tax on the non-PAYE income when you make this return, on or before Oct. 31 2007 for income in the year 2006.
If in doubt, or if you're intimidated by tax returns, or if you don't know how to compute your correct tax bill by claiming all business related expenses and entitlements, engage an accountant to do this for you.
But either way it's irrelevant as you have to pay the 5% PRSI on your self-employed income, you don't have a choice about this. It's true, you don't get much benefit from it - it entitles you to contributory old age pension, bereavement benefit, and maternity leave benefits, I believe - but there's nothing much you can do about this either.
By the way, the reason you were made an employee is probably because the revenue takes a dim view of companies engaging de-facto full-time employees as contractors. This has been rectified by the company, but you're still going to have to make a tax return for the year as you had non-PAYE income. You can pay your PRSI and income tax on the non-PAYE income when you make this return, on or before Oct. 31 2007 for income in the year 2006.
If in doubt, or if you're intimidated by tax returns, or if you don't know how to compute your correct tax bill by claiming all business related expenses and entitlements, engage an accountant to do this for you.
I was wondering what the situation would be if I decided not to make a return and the taxman came looking for his money somewhere down the line. could I not claim that I thought i was a paye worker and it was up to my employer to pay the tax and prsi. Revenue may well then agree that I should have been classed as a paye worker and go after my employer for the money.
This would be a pretty foolish option for you to take, in my view.
For a start, it's tax evasion - a criminal act. As a self-employed person you are responsible for your tax affairs. Becoming an employee doesn't absolve you of your responsibilities during the time you were a contractor. Hoping that the revenue will say "ah fair play, sure we'll go after the company for your tax and PRSI" is optimistic in the extreme. In fact, I would suspect there is zero chance of this happening.
I suppose there is no guarantee the Revenue will ever find out about your tax evasion. But there is a clear paper trail of contractor payments to you from your current employer and if they are ever audited you will have nowhere to hide. And when the Revenue hit you with interest and penalties, you will surely think that it was not worth it.
Just pay the tax, is my advice.
I doubt if your bill is big enough to sit around worrying about when and where you might be caught.
For a start, it's tax evasion - a criminal act. As a self-employed person you are responsible for your tax affairs. Becoming an employee doesn't absolve you of your responsibilities during the time you were a contractor. Hoping that the revenue will say "ah fair play, sure we'll go after the company for your tax and PRSI" is optimistic in the extreme. In fact, I would suspect there is zero chance of this happening.
I suppose there is no guarantee the Revenue will ever find out about your tax evasion. But there is a clear paper trail of contractor payments to you from your current employer and if they are ever audited you will have nowhere to hide. And when the Revenue hit you with interest and penalties, you will surely think that it was not worth it.
Just pay the tax, is my advice.
I doubt if your bill is big enough to sit around worrying about when and where you might be caught.But the thing is I was always an employee from the time I started. Just because my employer decided he wanted to avoid paying prsi on my behalf and decided that I was self employed does not make me a self employed person in the eyes of the law. The revenue have set down certain conditions which must be fulfilled for a person to be classed as self employed and I did not fulfill any of them. I could contact revenue and get them to rule on my employment status, but this would put me in the dog house with my employer. or I could wait until I leave the job next year when my contract is up and then contact revenue to decide on my tax status. Or I could just pay the tax. Ill have to think about it
No matter what you do, you are liable for income tax and PRSI on your income. An employee pays his or her own PRSI - indirectly through payroll deductions which are then handed over to the revenue. An employer pays additional PRSI on behalf of employees - the employer contribution.
I assume you invoiced the company and were paid your fee with no tax deducted. You are supposed to pay this tax yourself for the time when you were a contractor, whether you were a "de facto" employee or not.
I assume you invoiced the company and were paid your fee with no tax deducted. You are supposed to pay this tax yourself for the time when you were a contractor, whether you were a "de facto" employee or not.
K
KalEl
Guest
You should seek professional advice on these points.
I'm not sure how the Revenue would view a situation like this.
If your "self employed" status is judged to be a sham, I'd imagine money paid to you would be deemed to be net of tax. The Revenue would go after your employer for the PAYE and PRSI on whatever gross salary equated to the money paid to you. Your employer would then come after you for the tax.
Certainly, digging your heels in on this issue will create a very messy situation for all parties-yourself included.
I'm not sure how the Revenue would view a situation like this.
If your "self employed" status is judged to be a sham, I'd imagine money paid to you would be deemed to be net of tax. The Revenue would go after your employer for the PAYE and PRSI on whatever gross salary equated to the money paid to you. Your employer would then come after you for the tax.
Certainly, digging your heels in on this issue will create a very messy situation for all parties-yourself included.
ubiquitous
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Did you register for Income Tax or VAT at the time? If you didn't register for VAT, and your gross income was above the VAT registration threshold at the time, you could well be exposed for a VAT liability on your earnings.
If you had any misgivings at the time about the contract, you really should not have signed it. The fact that you signed it at the time will undermine to some extent any fresh contention on your part that it was a sham.
The Revenue and/or Social Welfare may well decide that your complaint is vexatious if you delay making it until you quit your current job.
If you had any misgivings at the time about the contract, you really should not have signed it. The fact that you signed it at the time will undermine to some extent any fresh contention on your part that it was a sham.
The Revenue and/or Social Welfare may well decide that your complaint is vexatious if you delay making it until you quit your current job.
C
Cormac06
Guest
Shane,
I am in exactly the same position as yourself. I was 'employed' as a self-employed contractor, even though every criteria stated by interested parties (IBEC, Revenue, dept. social & family affairs) state that i clearly was an employee and my (then) 'employer' was using this as a method of avoiding paying & collecting tax. I have since moved jobs and have lodged a complaint against the employer in question. I lodged this in March 06 and have only this week had firm contact from the relevant office (Scope Section of the Dept of Social & Family Affairs). I'm not sure what the process is for claiming against your employer (should you wish to go down that route, now or in the future) but I will let you know.
I have sought legal advice on this and even though i did sign a 'contract' of self-employment, this cannot be legally binding as it is up to the employer to dictate a person's status, not the 'employee', i.e. just because you sign a contract that says you are self-employed doesn't mean you are self-employed if it's against the law.
I was also advised that if i am found to have been an employee during my employment, the employer will be liable for all PAYE payments during my employment as all monies paid to employees in Ireland are on a net basis. In simple terms, the revenue holds the employer responsible for the PAYE, not the employee. This is, however, only applicable assuming you are found to have been in fact an employee.
I am in exactly the same position as yourself. I was 'employed' as a self-employed contractor, even though every criteria stated by interested parties (IBEC, Revenue, dept. social & family affairs) state that i clearly was an employee and my (then) 'employer' was using this as a method of avoiding paying & collecting tax. I have since moved jobs and have lodged a complaint against the employer in question. I lodged this in March 06 and have only this week had firm contact from the relevant office (Scope Section of the Dept of Social & Family Affairs). I'm not sure what the process is for claiming against your employer (should you wish to go down that route, now or in the future) but I will let you know.
I have sought legal advice on this and even though i did sign a 'contract' of self-employment, this cannot be legally binding as it is up to the employer to dictate a person's status, not the 'employee', i.e. just because you sign a contract that says you are self-employed doesn't mean you are self-employed if it's against the law.
I was also advised that if i am found to have been an employee during my employment, the employer will be liable for all PAYE payments during my employment as all monies paid to employees in Ireland are on a net basis. In simple terms, the revenue holds the employer responsible for the PAYE, not the employee. This is, however, only applicable assuming you are found to have been in fact an employee.
Hi Cormac 06,
Thanks for that, Yes I was thinking along those lines myself - that the employer would be held responsible for all tax and prsi not paid. Did you actually make returns as a "Self employed" person? I have considered making a return for last year but felt aggrieved by having to declare my income as self employed when it really wasnt. This would mean having to pay prsi on other investment income as well.
I also thought about asking my employer to backtrack to when I started in Aug 05 and put my record straight as a PAYE person from then. I would be prepared to pay the PRSI and Tax which should have been deducted if I was treated as a PAYE worker. My employer would have to pay around €2000 in employer PRSI, so I just know what he is going to say to that suggestion, the type of individual that he is.
Although from what you are saying I wouldnt even be legally bound to pay anything as all payments made to employees are made net of Tax. Best of Luck with Your case.
Thanks for that, Yes I was thinking along those lines myself - that the employer would be held responsible for all tax and prsi not paid. Did you actually make returns as a "Self employed" person? I have considered making a return for last year but felt aggrieved by having to declare my income as self employed when it really wasnt. This would mean having to pay prsi on other investment income as well.
I also thought about asking my employer to backtrack to when I started in Aug 05 and put my record straight as a PAYE person from then. I would be prepared to pay the PRSI and Tax which should have been deducted if I was treated as a PAYE worker. My employer would have to pay around €2000 in employer PRSI, so I just know what he is going to say to that suggestion, the type of individual that he is.
Although from what you are saying I wouldnt even be legally bound to pay anything as all payments made to employees are made net of Tax. Best of Luck with Your case.
the latest on my situation is that I asked my boss to submit a paye return for me for the time in question as I was an employee. He declined. I emailed revenue and explained the situation. They are going to investigate the matter of whether I was an employee or self employed