Contractor considering setting up ltd - tax implications

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guerngirl

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Hi
I work on a contract basis in financial services and am considering setting myself up as a ltd company. I have been told I could avail of corporation tax rate of 12.5per cent. On a salary of 70000k for example what impact would moving from standard taxation to corporate taxation have on take home pay , including keeping in mind USC paye prsi etc? I'm trying to work out if it really is worth it to be paid as a corporate instead of as a contractor. Im married and we both earn, fulltime and are currently taxed jointly.
Thanks for your help.
 
The 12.5% tax rate only applies to profits after you take the €70K salary. You would still have the pay PAYE/PRSI/USC on the salary - well the company pays it but it's the same thing really.

You would possibly/probably be liable to the close company surcharge for service companies which would negate a lot of the reason for making the move to a limited company.
 
As a general rule of thumb, if you're already spending all that you earn, there won't be a significant benefit in trading through a limited company.
 
DB74 said:
The 12.5% tax rate only applies to profits after you take the €70K salary. You would still have the pay PAYE/PRSI/USC on the salary - well the company pays it but it's the same thing really.
Click to expand...

+1. In fact, it's a bad idea to have any 'profits' in a company to tax, as after the 12,5% tax, if you then want to actually get your hands on that money, that will then be taxed as income, so you'll be double-taxed.

Contracting as a limited company is normally used when you move around different employers - a lot of intermediary agencies won't touch you unless you have one. If you (or your limited company rather) are working for just one company all the time, the Revenue will take a dim view and treat you as an employee of that company. I think the only possible benefit might be if you have legitimate expenses that could be paid by your limited company, and similarly to get a VAT number for qualifying expenses.
 
p15574 -- "think the only possible benefit might be if you have legitimate expenses that could be paid by your limited company, and similarly to get a VAT number for qualifying expenses."

this can be done as a sloe trader - no need to set up a limited company
 
The main upside of going down the company route is the pension angle.

A sole trader can only contribute a fixed percentage of their income to a pension scheme based on their age and a maximum notional salary of €115,000.

Take someone who's 52...he or she can only contribute €40,250 to a pension if he or she is a sole trader or an employee.

But a company can contribute an unlimited amount to its employees pension scheme (subject to the €2.3 million fund cap).

With these one man band companies, no corporation tax or close service company surcharge should ever arise because any surplus at the end of the year should be just lashed out in a combination of salary and pension contributions.
 
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