no rights self employed

[z107]

very good analysis there DB74.

Before someone posts that self employed get 'better expenses' or somehow are entitled to 'more expeneses' etc, etc... only expenses incurred wholly and solely in the course of running the business are allowable. This applies to both self employed and employees alike.

 

[Complainer]

Just to add that (on salaries greater than €18,304) a self-employed person will ALWAYS pay at least €2,094 more in PAYE/PRSI than an employee on the same income.

This is due to 2 things:

1. The first €127 per week (€6,604) of an employee's gross wage is exempt from PRSI. This equates to €132 per year (very small amount I know but I don't see the logic in it at all)

2. An employee is entitled to the PAYE tax credit while the self-employed person is not (equates to €1,830 per year)

Also, for salaries over and above €26,000, the employer's PRSI rates rises to 10.75% so even for a salary of €30K, the employer will pay a total of €5,319 more PAYE/PRSI than the employee, again with little or no benefits to show for it.

This doesn't quite fit with the reality of self-employed people boasting about keeping 80% of their income.

 

[Firefly]

Self employed do not pay the same PRSI as employees, therefore they don't get the same cover as employees.

Self employed do not have the option pay the same PRSI as employees, therefore they don't get the same cover as employees.

 

[Firefly]

This doesn't quite fit with the reality of self-employed people boasting about keeping 80% of their income.

I think we've seen this one before so I'll try my best with these...

1/6 of home heating light and insurance for home office expenses
This can be done, but I have been advised by my own accountant that there could be issues regarding capital gains tax if I ever sell my home as part of it would not be my PPR. In any case, the monies involved are pretty low - maybe 200 euro a year as an expense, resulting in a saving of 40 euro in corporation tax

equipment cost( lap top etc)
attendance at seminars, training
professional fees/memberships
education costs

These expenses are at the discretion of any business owner. I could go on 20 courses this year if I wanted to and I could expense them all. The problem with this though is that I would have to pay for them and I would be left with little or no income. Not much point saving tax if you have to increase your expenses to a point where you have no income.

subsistence
taxis
travel mileage(kilometerage?)
business expenses incurred

There are strict guidelines for all of these. Of course you can expense what you want to show different annual profits, but the rules for these expenses are treated differently for taxation purposes. As an example, say I have to drive 20 kms to a client. I can quite easily put down 10euro per km for mileage if I want to and I will pay less corporation tax. However, anything above the civil service rates attracts income tax which is higher than corporate tax. Just to add, I cannot charge mileage to my normal place of work either, so if, as in my case, I perform all of my work for one employer I can't claim mileage for this, unless I have to travel to an additional site which rarely happens.

pension
This is one area which AFAIK is still attractive to self-employed. My own company can pay quite a large pension payment to me annually and it is deducted as an expense. It can be based on what the fund would have to be worth to sustain me at half my expected final salary (I could be wrong on the %). The reason for this is pretty straight forward though...I am not entitled to most or all of the old age pension and therefore the state is giving me relief now so it doesn't have to give me money later. Of course I take all the risk here...my pension could turn out to be a real winner (in which case I will pay income tax which in essence gives the state back some/all of the relif I have received) or it could be worth sweet fanny adams. In any case, I will have to put this money away now for the long haul as I am not entitled to a defined benefit pension that others are.

I for one would be in favour of a system where all employees....civil servants, private sector and self-employed would have the same basic pension contribution requirements (% of salary) and entitlements. Anything above this could be made at an individual level with no taxation relief given.

Firefly.

 

[z107]

This doesn't quite fit with the reality of self-employed people boasting about keeping 80% of their income.

That's not reality.

In reality, there are audits. If I decided that I was going to keep 80% of my income this year, I could do that. However, red flags would be raised when my accounts are submitted.

Anyone can decide not to pay tax. People can work cash in hand, or declare rental income etc, etc... However, it doesn't make it legitimate.

Are you privy to karak's accounts? How do you know Karak hasn't been audited, or wont be audited? Should I post here saying that I'm an employee and get to keep 90% of my income because I fiddled my tax credits? It's easy to do.

 

[DB74]

This doesn't quite fit with the reality of self-employed people boasting about keeping 80% of their income.

What's the problem here?

Karak has allowable business costs which equate to 20% of his invoices. He then pays tax (PAYE, PRSI & USC) on the remaining 80%.

He still can't get JSB or illness benefit or other benefits that Class A PRSI employees get.

Also that thread is over 3.5 years old

You won't hear to many self-employed people "boasting" about anything, to use your phrase

 

[Firefly]

To be fair there are expenses that fall into a grey area such as a mobile phone and a laptop. I can expense both of these as company expenses but am not meant to use them for non-business use. The enforecement of this IMO and the monies invloved would not be worth Revenue's while pursuing. For all the risks of being self-employed this harldy makes it worthwhile.

 

[Complainer]

What's the problem here?

Karak has allowable business costs which equate to 20% of his invoices. He then pays tax (PAYE, PRSI & USC) on the remaining 80%.

So you 'retain' means 'pays tax (PAYE, PRSI & USC)'? That's not my understanding of 'retain'.

 

[Firefly]

So you 'retain' means 'pays tax (PAYE, PRSI & USC)'? That's not my understanding of 'retain'.

Would you care to reply to my earlier post (#24) regarding the expenses listed?

 

[z107]

To be fair there are expenses that fall into a grey area such as a mobile phone and a laptop. I can expense both of these as company expenses but am not meant to use them for non-business use. The enforecement of this IMO and the monies invloved would not be worth Revenue's while pursuing. For all the risks of being self-employed this harldy makes it worthwhile.

I wonder how many employees are posting on here with company computers.


(Employees as well as self-employed could use company phones and laptops for non-business use. I'm sure that if the revenue wanted to, they could legitimately insist on BIK being paid)

 

[Firefly]

I wonder how many employees are posting on here with company computers.


(Employees as well as self-employed could use company phones and laptops for non-business use. I'm sure that if the revenue wanted to, they could legitimately insist on BIK being paid)

That's very true.

 

[DB74]

So you 'retain' means 'pays tax (PAYE, PRSI & USC)'? That's not my understanding of 'retain'.

Yep, that's what I read from his post

He doesn't mention tax so I think it's safe to assume that he means the 80% is before all taxes.

 

[DB74]

Just to clarify, if someone makes a net profit (sales less expenses) of €30K, they will pay PAYE, PRSI, & USC of roughly €6,000 so their take-home portion is 80% of their NET profit.

So therefore, on the assumption that their actual sales HAS to be greater than the €30K net profit, their take-home HAS to be less than 80% of their sales.

If we assume that in order to earn this net profit figure of €30K they would have had to generate sales of €37,500 (estimate allowable business expenses at 20% of sales) then their take-home percentage is actually only 64% of sales

It is only at a net profit of €26,000 that a self-employed person's after-tax take-home pay is greater than 80% of their NET profit, let alone their sales.

And if someone earned a NET profit of €10K, they would pay taxes of roughly €950 which equates to a take home of 91%. However if they had to generate sales of €12,500 to earn that €10K net profit, their take home would equate to just 72.4% of their sales, which is still nowhere near the figure of 80% mentioned by Karak

 

[Complainer]

Yep, that's what I read from his post

He doesn't mention tax so I think it's safe to assume that he means the 80% is before all taxes.

Seeing as the general context of that thread is about take-home pay for contractors vs employees, I think it is a very UNSAFE assumption to assume that he means 'before all taxes'.

You won't hear to many self-employed people "boasting" about anything, to use your phrase

You're right, of course. They are generally keeping their heads down so as not to draw attention to how they pay less tax than employees. I'm sure Kerak will get booted out of the select club for letting the cat out of the bag.

 

[DB74]

Yes ignore my other post please where I've run the figures to show that your assumption about Karak doesn't add up.

 

[Firefly]

Yep, that's what I read from his post

He doesn't mention tax so I think it's safe to assume that he means the 80% is before all taxes.

I think it is implied that after all the expenses are deducted that the income tax would only amount to 20% of total revenue.

Take the following example:

Invoice Amount in the year : 100,000
Pension Contribution 30,000
Other expenses 10,000
Salary 60,000
Net Profit NIL

Total income tax for a single company director on 60K is approx 15k per annum according to Deloitte tax calculator.

So, this can be represented as paying only 15% of total income. However, 30k has to be put away into a pension (which will attract income tax later anyway (if it makes money)) and expenses of 10k are paid for - again money gone. So, whilst it is possible to pay 15% tax on total revenue...you're really only earning 60k a year. It's like saying a large PLC only pays a small percentage of tax on revenue...it ignores the costs.

 

[z107]

You're right, of course. They are generally keeping their heads down so as not to draw attention to how they pay less tax than employees. I'm sure Kerak will get booted out of the select club for letting the cat out of the bag.

Troll.

 

[Firefly]

You're right, of course. They are generally keeping their heads down so as not to draw attention to how they pay less tax than employees. I'm sure Kerak will get booted out of the select club for letting the cat out of the bag.

I really wish there was a cat in the bag. I would again invite you to reply to my earlier post regarding these expenses. Perhaps I (and my accountant) are missing something?

 

[Complainer]

Yes ignore my other post please where I've run the figures to show that your assumption about Karak doesn't add up.

Your figures are not Kerak's figures. He specifically refers to '80% of invoiced hours'. Invoiced hours is a gross figure, not a net figure. He's self-employed, and he's paying 20% of his income in taxes, and keeping (or 'retaining') the other 80%.

 

[orka]

Trying to get vaguely back on topic...

Also, for salaries over and above €26,000, the employer's PRSI rates rises to 10.75% so even for a salary of €30K, the employer will pay a total of €5,319 more PAYE/PRSI than the employee, again with little or no benefits to show for it.

It’s a bit of a stretch to describe the employer as paying ‘X more PAYE/PRSI than the employee’ as if it was personal PRSI to the employer. Paying an employee’s insurance is a cost of doing business – it shouldn’t be equated as personally paying into something which will result in personal benefits. It is no different than a self-employed person paying VAT on goods or services provided – again, it’s a cost of doing business, it doesn’t make it part of the person’s personal taxation.
You also seem to have completely missed the point that the government receives much more total PRSI as a result of an employee’s employment than from a self-employed person because the self-employed do not pay the 10.75% employers PRSI. Looking at total PRSI (employer plus employee) received by the government:
On 18K income the government receives €1,530 (employee) vs €720 (self-employed).
On 30K, the government receives €4,161 (employee) vs €1,200 (self-employed).
On 50K, its €7,111 (employee) vs €2,000 (self-employed).

Looked at another way, 4% seems a reasonable amount to pay towards a contributory pension which both employees and the self-employed get. The 10.75% employer’s PRSI then provides the employee with insurance (paid for by the employer) to provide some health benefits plus benefits in case the employment contract is not continuing for some reason. The self-employed do not make this contribution so the benefits are not provided.