Income declaration methods

[Winter Miles]

Hi

Posting on behalf of my sister as she is not tech savvy.

She is a director of a small building company that her husband owns and runs. She has recently secured some independent referral work doing interior design and she has started to build a good client base. Initially she did it as a hobby but now wants to charge a fee. She has spent the last 2 months working on a number of projects.

Should she set up an independent ltd company, declare her wages as a sole trader or use the building company with which she is a director of to invoice fees etc.

I assume such work would attract VAT?!

 

[Taxpert]

Re vat.

If she bills the work through the existing company she will have to charge vat. The company can reclaim any vat paid out on relevant supplies. Apart from that she simply takes a salary which is taxed in normal way.

Alternatively she can set up her own company and broadly operate as above.

Or she can work as a sole trader. The vat rules remain the same. If her turnover is less than €37,500 pa she has the option of registering for vat or not. If t/o is above 37.5 she must register for vat.

Without knowing details of projected income it's hard to know what model to recommend. But if t/o is relatively modest (say less than 50k?) it's probably not worth forming a company.

As for exercising the vat option one would need to know her customer profile. If they are largely businesse (and they can reclaim vat) she should probably register. If they are largely private individuals she should think twice.