Sole Trader Questions

M

Mark_jmc

Registered User
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Hi All,
I may be in a situation where I will be setting myself up as a sole trader,
the company I I am working as an employee for on contract (contract ends dec) have asked If i would like to continue on as a self employed contractor for a number of months next year- the reason is that there is a hiring freeze in the company (multinational), this will most likely change next year and when it does I will become a permanent employee. If i do go ahead with this i will obviously engage the services of an accountant but in order to start things ticking over on my mind I have a few questions:

  • Because I will only be working for one company would revenue have a 'difficulty' with my sole trader status?
  • From an expense deduction would it be acceptable to claim 75% of incurred car costs- petrol/services/tax/insurance etc- this would be a true reflection on how much I use my car for my 'business'
  • What other legitamate expenses could I deduct for tax purposes?
  • The company I will be working for are a VAT exempt company. Given that my income would be over the VAT exemption threshold do I still have to charge VAT/how does this work
  • When working out the tax on my salary- ie what left over after all legitimate expenses/pension contributions etc are taken out. what level of tax will i pay/waht tax credits do i get?- would i be correct in saying that i would deduct 1650 tax credit from the salary and the remainder would be taxed as normal - ie 20//41% prsi 4%- what standard rate cut off points are there etc?
I appreciate these are a lot of questions and as i said if I do go ahead I will engage with an accountant to ensure things are done in a compliant & tax efficient way, im just trying to get my head around this as I have been a PAYE employee all my life and this would be a new departure for me!

I appreciate any input you may have,
Mark
 
Revenue will definitely have a problem with your 'sole trader' status. If Revenue deem you an employee, they have the right to assess the company, you or both for any taxes they deem should have been paid.

Expense deductions are on a receipted basis for petrol etc. You should do an analysis of business mileage v total mileage and keep a very good diary to back up your business mileage. This will give you the % to allow.

The VAT status of the company you work for is irrelevant. You have to look at your 'trade' for your VAT responsibilities. So you will charge VAT and the company will have no right to reclaim the VAT.

Yes, use standard rate bands and credits for working out salary (you will not get PAYE tax credit).
 
I'd agree with Paddy, I would be really concerned about motor expenses in light of the recent contractors project.

Also while VAT is the OPs responsibility I imagine the multinational has a 13B exemption so the OP would not charge them VAT.
 
If you are ever made unemployed in the future it may be harder or impossible to claim dole as a sole trader. Your prsi contributions to date will be less valuable to you in the future.

Also if you do go the sole trader route could you get your company to pay tax on your behalf on a RCT basis ? It might be handier than leaving everything until the year end.
 
RCT - no mention of construction, forestry or meat processing, so don't know where you got that from?
 
Mark_jmc said:
When working out the tax on my salary- ie what left over after all legitimate expenses/pension contributions etc are taken out. what level of tax will i pay/waht tax credits do i get?- would i be correct in saying that i would deduct 1650 tax credit from the salary and the remainder would be taxed as normal - ie 20//41% prsi 4%- what standard rate cut off points are there etc?
Click to expand...


This is not how tax credits work - you multiply the taxable income by 20% up to your lower rateband and then 41% above that and then deduct the personal tax credit.
 
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