Misc questions re. registering as self employed for IT contracting

[ella2007]

Hi,

I have been offered some contract work to do some web design and development, database work, training and user testing for a website. I need to register as self-employed for this work.


This is the first time I will work as self-employed, and I am slightly confused about the whole process. I hope that someone can help and answer my questions:

- the person who wants to avail of my "services" has offered me a daily rate in her contract. Do I need to ask her to also specify an hourly rate? And in that case, would a day as a consultant be 7 or 8 hours? I am thinking of a situation where maybe I have to deliver training for her, and it would only last for 2 hours, in that case we would need an hourly rate in the contract - am I right to think that?


- regarding VAT, she is telling me that because I probably will not go over the threshold of 35K per year then I shouldn't charge VAT on top of my fee. I am actually not sure about that (i.e. how do I know now how much money I will make?), what is the best way to go about this? Do I have to decide right now if I need to register for VAT, or can I register later in the year if I see I will go over the threshold?


- on the same topic, can I deduct VAT on goods I buy for my business and the costs I have. Is this only possible if I am registered for VAT?


- regarding expenses, for example if I have transportation/travel costs to the other side of the country, or photocopying costs, telephone costs (the zork is home-based in my own house), how would I go about that? Does this need to be specified in the contract?

Thanks a lot to anyone who can help me.

 

[ATracey]

I have been offered some contract work to do some web design and development, database work, training and user testing for a website. I need to register as self-employed for this work.....

Go ahead and register with the Revenue Commissioners.....
Consider use of a Business Name....
Check other threads for some good advice...including the stuff at the top


- the person who wants to avail of my "services" has offered me a daily rate in her contract. Do I need to ask her to also specify an hourly rate? And in that case, would a day as a consultant be 7 or 8 hours? I am thinking of a situation where maybe I have to deliver training for her, and it would only last for 2 hours, in that case we would need an hourly rate in the contract - am I right to think that?

Think about a Daily Rate and a Half-Day Rate...
If the relationship is good, you won't charge an odd hour here or there...
The day rate might be 8 working hours......even ten if you are on site or running a course...don't be afraid to give more than is paid for..
Half day rate...60% of day rate...for morning or afterrnoon...or any period over three hours


- regarding VAT, she is telling me that because I probably will not go over the threshold of 35K per year then I shouldn't charge VAT on top of my fee. I am actually not sure about that (i.e. how do I know now how much money I will make?), what is the best way to go about this? Do I have to decide right now if I need to register for VAT, or can I register later in the year if I see I will go over the threshold?

If you register for VAT, you can reclaim VAT on Purchases, including Computers/Stationery and anything else that the business needs...
You don't have to register straight away...just when you think you are going to go over 6k in two months...so register when it suits.....you've to make returns once you register...


- on the same topic, can I deduct VAT on goods I buy for my business and the costs I have. Is this only possible if I am registered for VAT?

as above..

- regarding expenses, for example if I have transportation/travel costs to the other side of the country, or photocopying costs, telephone costs (the zork is home-based in my own house), how would I go about that? Does this need to be specified in the contract?

If you travelling for yourself, normally you cannot claim if off Clients...
e.g Client Dublin, live Galway..
If you are travelling for Client, you normally can...i.e. Client Dublin based but wants me to provide Training in Galway...
Look at Civil Service Rates per Reveue Website...these are the max you should charge...

Whatever you do, make sure you have an agreement in writing...

Think of it as a pre-nuptial agreement....
When you are engaged is a good time to agree it...not when you are divorcing...

If you need any further elaboration, get in touch privately....

Good luck!

 

[gonk]

the person who wants to avail of my "services" has offered me a daily rate in her contract. Do I need to ask her to also specify an hourly rate?

You need at a minimum to define in the contract what the length of a working day is. Since you say your hours may be irregular, I think it would be preferable to set an hourly rate for your time. I disagree with the other poster that you should occasionally give time for free. Once you and your client have agreed a mutually acceptable fair rate for your time, then charge for all the time you spend on work for her. As an IT contractor your time and skills are your stock-in-trade. You haven't anything else to sell, so don't give them away.

regarding VAT, she is telling me that because I probably will not go over the threshold of 35K per year then I shouldn't charge VAT on top of my fee. I am actually not sure about that (i.e. how do I know now how much money I will make?), what is the best way to go about this? Do I have to decide right now if I need to register for VAT, or can I register later in the year if I see I will go over the threshold??

- on the same topic, can I deduct VAT on goods I buy for my business and the costs I have. Is this only possible if I am registered for VAT?

You should estimate what your revenue from this contract and any other work you may do will be and if it's likely to go over the threshold, then register. If your client is also registered, then the VAT on your invoices will not be a cost to her, as she can recover it from the VAT she charges on her sales. If you are registered, you can likewise recover VAT on legitimate expenditure for your business, e.g., computers, software, so it is probably on balance to your benefit to be registered.

- regarding expenses, for example if I have transportation/travel costs to the other side of the country, or photocopying costs, telephone costs (the zork is home-based in my own house), how would I go about that? Does this need to be specified in the contract?

Yes. You might, for example, agree to use the civil service travel and subsistence rates when working away from home and produce receipts for any other out-of-pocket expenses.

 

[ButtermilkJa]

...Yes. You might, for example, agree to use the civil service travel and subsistence rates when working away from home and produce receipts for any other out-of-pocket expenses.

This is interesting. I was under the impression that you can't claim subsistence or mileage rates as a self-employed individual? These are strictly PAYE expenses.

Also, just to check another point above... I have just started as a graphic design contracter for a firm in Dublin city. I have a daily commute of around 1 hour each way into the city. Do I add this to the rate I charge the client as I will be away from my office for those 2 hours or do I just charge for what I work in their offices? What's the done thing generally?

 

[gonk]

This is interesting. I was under the impression that you can't claim subsistence or mileage rates as a self-employed individual? These are strictly PAYE expenses.

I'm a contractor and my business is set up as a limited company with me as an employee. I'm paid a PAYE salary by the company and I can and do claim legitimate expenses I incur from my company.

Also, just to check another point above... I have just started as a graphic design contracter for a firm in Dublin city. I have a daily commute of around 1 hour each way into the city. Do I add this to the rate I charge the client as I will be away from my office for those 2 hours or do I just charge for what I work in their offices? What's the done thing generally?

I would generally not charge clients travel time, in the same way as a person employed directly doesn't usually get paid for the time they spend going to work. If it was longer than usual though, say if I had to go from Dublin to Cork for a meeting, then I would charge. I would, however, always claim my travel expenses, be they driving or public transport, from my own business. It's a legitimate way of getting a small amount of tax-free money out of the business.

 

[ButtermilkJa]

I'm a contractor and my business is set up as a limited company with me as an employee. I'm paid a PAYE salary by the company and I can and do claim legitimate expenses I incur from my company.

Ah, I see. I think it may be the case that as a 'sole trader' I cannot claim these.

... I would, however, always claim my travel expenses, be they driving or public transport, from my own business. It's a legitimate way of getting a small amount of tax-free money out of the business.

I will be collecting my bus tickets

 

[ang1170]

Ah, I see. I think it may be the case that as a 'sole trader' I cannot claim these.

No, you can claim any travel expenses, and the simplest way of doing this is to use the civil service rates: there's no distinction between self-employed and PAYE. Note however if you spend all your time working at one particular place, that becomes effectively your place of work, and you cannot claim for commuting to and from your place of work.

I'd strongly recommend (as I'm sure most people would) you spend an hour or so with a good accountant who will set you straight on all of this.

As for hourly/daily rates it tends to vary between the type of service being offered. I'd be inclined to stick with one or the other (if daily, then half-day as the shortest time), depending on clients expectations and what's normal for the specific type of service. That is, don't mix them with the same client for the same service.

Normally you wouldn't charge for travel for the kind of work you describe, however it is important: you'd be mad not to pay yourself the (quite generous) civil service rates for mileage and subsistance.

By the way, has anyone else noted how "un-green" these are: I regularly travel to Belfast: if I go by train I just cover the direct cost with expenses, if I go by car I get expenses towards the maintenance of my car at a rate that probably exceeds the real cost of the single trip being claimed.

 

[ella2007]

You should estimate what your revenue from this contract and any other work you may do will be and if it's likely to go over the threshold, then register. If your client is also registered, then the VAT on your invoices will not be a cost to her, as she can recover it from the VAT she charges on her sales. If you are registered, you can likewise recover VAT on legitimate expenditure for your business, e.g., computers, software, so it is probably on balance to your benefit to be registered.

Thank you so much to all of you for all these EXTRA helpful replies!

Regarding the VAT question, I do believe that my client is registered for VAT, but I need to ask her. It looked like she wanted me not to charge her VAT so she might not be registered. If she isn't, this would be an extra cost for her, so what would be the best way to go about this? Reduce my daily/hourly fee so that the overall cost is still alright for her, or just tell her that I need to charge her VAT?

I would prefer to register for VAT, as this would mean less expenses for me, i.e. not paying VAT on things I buy. Are there actually any negative points in registering for VAT? It looks like this is only a good thing for me?

I actually bought a computer this year in March, but as I am not registered yet for VAT, would there be any way for me to reclaim the VAT back on this purchase once I am registered for VAT?

Thanks again for all the help!

 

[ang1170]

Regarding the VAT question, I do believe that my client is registered for VAT, but I need to ask her. It looked like she wanted me not to charge her VAT so she might not be registered. If she isn't, this would be an extra cost for her, so what would be the best way to go about this? Reduce my daily/hourly fee so that the overall cost is still alright for her, or just tell her that I need to charge her VAT?

Whether your client is registered for VAT or not is irrelevant: it's whether you are registered that determines of you charge VAT or not. If you are registered you MUST charge VAT at the appropriate rate. It will depend on whether your client is registered for VAT or not whether she can claim it back or not. Conversly, if you're not registered for VAT you can't charge VAT.

As I said though: spend some time with an accountant, as you won't get all your questions answered here (and those that do may be incomplete or inacurate for your own particular circumstances).

I would prefer to register for VAT, as this would mean less expenses for me, i.e. not paying VAT on things I buy. Are there actually any negative points in registering for VAT? It looks like this is only a good thing for me?

The main disadvantage is (I think) filing returns, but again: speak to an accountant.

I actually bought a computer this year in March, but as I am not registered yet for VAT, would there be any way for me to reclaim the VAT back on this purchase once I am registered for VAT?

You may be OK on this, but same answer: speak to an accountant.

 

[ella2007]

Thanks all for the answers and all the help! Really helpful.

ella2007

 

[Graham_07]

No, you can claim any travel expenses, and the simplest way of doing this is to use the civil service rates: there's no distinction between self-employed and PAYE.

Yes you can claim the expenses as a "sole trader" but on an "as-incurred" basis, not on CS rates. i.e. actual cost of travel / fuel/insurance/depreciation etc. This per several Revenue Auditors I have encountered over the years.

The self-employed proprietory director of their own company with their earnings on PAYE is dealt with on CS rates as you mentioned.

 

[ButtermilkJa]

This is what I assumed. So, as a sole trader, if a client asks me to drive to Cork and back one day, all I can do is save my petrol receipt and claim it as an expense. I cannot charge mileage rates and add them on to my invoice.

 

[Graham_07]

This is what I assumed. So, as a sole trader, if a client asks me to drive to Cork and back one day, all I can do is save my petrol receipt and claim it as an expense. I cannot charge mileage rates and add them on to my invoice.

By all means you can charge the client whatever you wish for services / mileage etc, but your CLAIM is on an "as incurred" basis. Also any charge you make to the client will be subject to VAT at the appropriate rates even though VAT is not claimable by you on petrol.

 

[ubiquitous]

No, you can claim any travel expenses, and the simplest way of doing this is to use the civil service rates: there's no distinction between self-employed and PAYE.

This is 100% incorrect. The tax free mileage & subsistence rates available to paye workers including company directors are NOT available to sole traders

I'd strongly recommend (as I'm sure most people would) you spend an hour or so with a good accountant who will set you straight on all of this.

I agree

 

[ang1170]

This is 100% incorrect. The tax free mileage & subsistence rates available to paye workers including company directors are NOT available to sole traders

I stand corrected, and apologies for the misleading info.

It was based on an asumption on my part, and probaby either incorrectly recalled or out-of-date info from a few years back. I should have made it clear I wasn't 100% sure.

One thing I've noticed though, is that there is very little info on the Revenue Web site on sole-trader issues (contrasted with tons of stuff on employee/director tax issues).

In any case, I'd repeat the advice to consult an accountant.