Company Director doing IT freelance work

[NewEdition]

I am a director of my own LTD company and do IT contracting.
My "company" gets contracts and my company charges the client X + VAT for services that I provide on behalf of my company.
My company pays me a salary each month that has the necessary tax / PRSI deductions etc.

However I have found an opportunity to do do some freelance work myself via an online site. The site is full of freelance / independent contractors / sole traders from lower cost countries.
If I set myself up on this site as a LTD company, clients will be put off I think, so would like to join the site as an individual.

How does this affect my situation as stated in the first paragraph?
Should I charge VAT for companies that I may do this freelance work for in Ireland, as its me that has obtained and will be doing the work, not my company. It is my company that is VAT registered, not me.
Also, what about payment for services? How should this be received?
Directly into my personal account with associated invoices and I declare it at the end of the year as additional income?

 

[gnf_ireland]

If I set myself up on this site as a LTD company, clients will be put off I think, so would like to join the site as an individual.

Why do you think this to be the case? Is it because you will charge them VAT or some other reason? How many of these clients will be outside of Ireland/EU so what scenarios will VAT arise?
Do you feel that clients will be concerned you will charge more because you are a company? Surely you will have this issue in any event if you are competing against lower cost countries?
If you are competing against the lower cost countries, surely you will focus on quality, standards, contact-ability, language etc? This would be the premium the client would pay, and surely this would come across better as an incorporated entity, rather than someone working from the garage at night ?

Should I charge VAT for companies that I may do this freelance work for in Ireland, as its me that has obtained and will be doing the work, not my company. It is my company that is VAT registered, not me.

You and your company are two different legal entities. You are not VAT registered and therefore would not charge VAT. However, you may also need to become VAT registered if you are above a certain threshold

Also, what about payment for services? How should this be received?

Into your bank account rather than the company one - or using paypal etc. You will need to invoice for services etc

Directly into my personal account with associated invoices and I declare it at the end of the year as additional income?

Yes, but keep in mind that for self-employed income you must pay yearly in advance (after the first year) so you will have a hefty bill the first year (effectively all the money will go in tax including pre-payment for next year)


If it was me (and I work in a similar scenario), I would be looking to put it through the company and selling the company as 'premium' over the lower cost countries

 

[NewEdition]

Thanks for that - Your comments are all valid and make sense.
Yes, I think people will be put off by a company, some of the work will be small, say one days work and the clients may be more attracted to Joe Bloggs rather than XXX Ltd.. But I do see your point, its the quality of the service that I should push.

Re the VAT, I dont see myself exceeding the limit and it does seem to be less complex to go the company route!

Thanks again!

 

[gnf_ireland]

Yes, I think people will be put off by a company, some of the work will be small, say one days work and the clients may be more attracted to Joe Bloggs rather than XXX Ltd.. But I do see your point, its the quality of the service that I should push.

If you work in IT you will know the ongoing discussions versus the use of offshore, near-shore and onshore options and the associated pros & cons of each

I would suggest you should consider setting yourself up as both the company and the person option, and if you get enquires from the person you can judge if the company is a better way to go. Remember company is registered, can show addresses and prove they are real. Joe Bloggs may not be !

 

[T McGibney]

You and your company are two different legal entities. You are not VAT registered and therefore would not charge VAT. However, you may also need to become VAT registered if you are above a certain threshold

This won't work. You can't duck VAT by routing some work through a company and some outside it.

 

[gnf_ireland]

This won't work. You can't duck VAT by routing some work through a company and some outside it.

OP is an employee & director of a company which is VAT registered. Why should this impact his VAT status as an individual?

Or is it that the Revenue will look unkindly on the proposal and say the company activities are effectively engaged in the same activity as the individuals one and therefore need to be consistent?

What if the second income was totally different - lets say they worked in IT in the company but also done some acting/modelling jobs in parallel - where would the revenue stand on this?

 

[T McGibney]

OP is an employee & director of a company which is VAT registered. Why should this impact his VAT status as an individual?

You'll have to ask that of whoever drafted the applicable legislation.

Or is it that the Revenue will look unkindly on the proposal and say the company activities are effectively engaged in the same activity as the individuals one and therefore need to be consistent?

Yes, that's it.

What if the second income was totally different - lets say they worked in IT in the company but also done some acting/modelling jobs in parallel - where would the revenue stand on this?

Depends on the nature of the business activities being carried on. Is acting subject to VAT? In general a company director carrying on as a sole trader an unrelated activity under the VAT threshold shouldn't be affected by the company's own activities for VAT purposes but caveat emptor in each case.

 

[gnf_ireland]

Ok @T McGibney that makes more sense. The fact that the OP is engaging in the same activity as both a company director and sole trader is the issue. If there were different activities it would potentially be different

@NewEdition in light of the other response, it has highlighted an interesting issue. The fact you are doing the same activity under two structures means its likely you would have to charge VAT on any applicable customer. I can see why the Revenue would view this proposal in that way. Apologies for giving you the incorrect steer here - I was thinking of it more in terms of company law where they are different legal entities.

So three options are open to you:
1. Only target customer who you would not be charging VAT to in any event
2. Register as an individual and when responding to bids state that you must charge VAT (if applicable) and will be invoicing through a limited company for compliance reasons
3. Register as a company and play the premium service card