IT Contractor - few questions

Folks,
Hope you can assist

Living in West and company will be registered here. I have secured a 6 month part-time contract (2 days one week and 3 the next)

First of, not sure if this is an easy question, but as IT Contractors is it better to be limited or sole trader?
I understand that its cheaper to be a sole trader with regards accountants but outside of that then I can't see the difference

Expenses - I will be driving 500km return trip once per week from my home (office) to the site of the company I am contracted to.
I also will have to stay in a hotel and eat.
Can I write any of these off to tax?

Anyone got any banks who are miles ahead of others which I could use? I am with NIB and leaning towards staying with them but their branch is closing here next month.

Thanks

In general, most contractors will find a company to be more tax-efficient than a sole trader arrangement.

That said, in my experience there's very little point in forming a company, if you are only going to make use of it for a short period, and/or if the amounts of turnover involved are limited.

My other half is an IT contractor. We set up a limited co. The main advantage is the expenses you can claim as a co verses a sole trader. Also, he pays me a small wage for doing his account's, etc. If you fall under the CRO earnings threashold you will qualify for the audit exemption then the accountants costs need be no more than that of a sole trader as you can do them all yourself. That is what we do. A bit of a learning curve in the beginning but fairly straightforward to make the returns. I paid an accountant to go through my returns before I submitted them to see all was in order. Only had to pay €121 for an hours time and probably won't have to do it next year as know how to now. Just don't miss any return dates as then you lose the audit exemption and will have to pay to have accountants audited. That's when it is more costly.
Also, you should look into the corporation tax emption for new start up companies announced last year. I think that it is for 3 years meaning you would not have to pay corp tax for years. Def better tax breaks if you set up as Co.
As to Bank's, Bank of Ireland had very good offers for new Business Ac's last year. There was free online business banking for 2 years; free visit to various accountant's and other professionals, some free accounting software although you can download tas basics for free now anyway which is a great deal. Details probably on their site.

Hi,

I have been an IT contractor for nearly 10 years now, and can bring the folowing to the discussion:

1 - The Ltd. Company is often a requirement if you are working through a recruitment agency - it has to do with the fact that they *can* in some circumstances become liable for your income tax. As has previously been stated on the thread, if your turnover is reasonable, it is also often more tax efficient.
2 - Expenses - I have been advised that if you operate 3/5 or less on a site, then it is not considered your "normal place of work" for revenue purposes. I have never managed to get an official answer on this, but I do personally work to this system. That means that in the situation you describe, you would be entitled to claim mileage at the civil service rates for the 500km pew week, and would be able to claim overnight expenses (either vouched by the Hotel bill, or using the civil service rates). This business of expenses while on site is a constant bug bear for IT contractors. I for example work usually in Meath Cork City and at home in north cork in a week, though depending on how each project is going I might spent 5 days a week in Meath or cork for 6-7 weeks at a time.

One last piece of advice about mileage that was passed on to me - if you are doing very serious mileage (like you are describing) the revenue kind of assume that you would have a company car rather than claim mileage on your own car

Best of luck
Les

Gtec said:

One last piece of advice about mileage that was passed on to me - if you are doing very serious mileage (like you are describing) the revenue kind of assume that you would have a company car rather than claim mileage on your own car

Click to expand...

This would be a bizarre assumption for Revenue to make. Company vehicles are largely a thing of the past for the vast majority of owner-manager company directors. BIK and other aspects of the tax system have made them ridiculously tax-inefficient. Any tax inspector that routinely expects small company owners to have company cars is either working on out-of-date assumptions or spending their time dealing with large corporates.

Thanks for all the advice.

After speaking to the company and my accountant they have advices that I go in as a sole trader to reduce setup and costs.

I will be staying in Dublin 1 night every 2 weeks but will have to travel to Dublin each week, 480km return journey from my house.

So I can either stay in my sisters house or a hotel, probably stay in hotel every 2nd time I am up there, but I understand that I can't claim expenses without the receipts as a sole trader, is that correct?

On "paying yourself" could someone offer some light on this one please.
When as a contractor you usually get paid, say 1000 per week, do you put a % aside always for you tax and remove the rest to your personal account?
Obviously I will need to pay the hotel, fuel etc which I will be using but also will require to pay mortgage, household bills etc. Can I take money out "willy nilly" or do I need to structure it that I remove the same amount each month?

I have decided to setup a business account with NIB, my current account is with them as is my wifes. It will make life easier I think to maintain them all.

Thank you for you advice.

What i think you shoudl do is go with an umbrella comopany.
That way you can claim full expenses as a director without having the initial set up costs as well as avoiding the costs of closing down teh company.
(Closing down a company is a serious pain in the ass - ittook me forever)

This umrella company will only pay you in much teh same way a PAYE gets paid.
i.e. you only receive your net pay. The umbrella company crowd will hold your vat and tax money. You will literally never have any access to thsi money at all. it will not ever end up in your account.

They will file all taxes and bi-monthly VAT returns on your behalf.

i know of one umbrella fiem which only costs 120 a month.
I knopw of another that charges 300 for the same service !! So make sure to get the right one.

A personal accountant would be marginally cheaper (maybe by a couple of hundred a year or so at most) but believe me, it's a conplete headache with paperwork and minding your VAT money and tax money in business accounts etc. etc.

I've done both ways and umbrella for me is by far the best.
pretty much teh same price and NONE of teh hassles.

A no brainer in my book.

Thsi way you are set up as a limited company also.
A lot of agencies insist on this.

As for expenses you will be able to claim mileage at civil service rates as well as overnight stays as well as a daily subsistnece amount when away from your main place of work (i.e. the west)

IT contractor using a company structure! Sounds like you are forgeting to return your close company service surcharges in your tax return.

Then again, maybe you have considered this and are extracting all the profits through salary or distributions.

I for one extract all of the profits in salary or distributions. I have long wondered if there was a more tax efficient way of dealing with profits, but thanks to your post (and my searching what "close company service surcharge" was) I know that I cannot!

In terms of my earlier comments relating to company cars - I should probably explain the term "serious mileage" by that I mean that you are genuinely doing 36,000 miles or more of business related mileage per year. It is more efficient to do that in a company car (assuming it costs less that 25k new) than to do it in a private car if you take into account the depreciation on the car.

Gtec

Hi all,

The pdf below explains the surcharge and provides an example
[broken link removed]

but I'm not sure if this is an issue in the case below (tax is not my strong point!).

Say:

Company has revenue of 100,000
You pay youself an income of 55,000 and leave 45,000 in the company.

In this case, I take it that there is no surcharge (normal corp tax 12.5% is still payable), as the amount of income withdrawn is greater than 50% of distributable income. Can anyone with tax knowledge verify this?

Much appreciated!