Proprietary Director working as PAYE employee working in multiple other companies

[yoga]

Hi,

I work as a PAYE employee for a number of companies on an ad-hoc basis (e.g. I might work three days for company 1 and two days for company 2 in one week. And the following week I could work just one day for company 1 and then one day for company 3. etc.).

All my employers pay me as a PAYE employee. I have split my tax credits among my employers, but because I don't work a fixed number of days for each I need to do a tax return at the end of the year to balance every thing up. I made my first such return (for tax year 2010) last week. Because I am registered as a PAYE employee, I submitted a form 12 return.

Each of my employers deducts PRSI according to the work I do for that employer in a given week. The deductions are all made under class A PRSI.

So here is my dilemma:
I am also listed as a proprietary directory of another company (I own 1 of 3 shares in this other company, giving me an equal controlling interest of 33% with two other shareholders). I am not an employee of this company and I do not earn any money from it whatsoever.

I have only just realised that my position as a proprietary director in this company might effect my employments, and more specifically the way I pay PRSI and PAYE. Is this the case?

Here are my specific questions:

• I believe that my PAYE contributions are correct because I am entitled to the PAYE tax credit as my earnings are all incurred in my PAYE employments. My form 12 tax return should balance my PAYE contributions. Is that correct?
• I am registered as a PAYE employee and submitted my tax returns using Form 12. Was this the correct form to use even though I am a proprietary director of a company I do not work for? I am not self assessed, and thus did not submit a form 11. Or am I actually supposed to be registered as self assessed because I am a proprietary director?
• As a proprietary director in one company, am I liable to extra penalties if I am ever late filing my tax returns e.g. if I do not get my form 12 submitted on time? Some threads on this site suggest that proprietary directors are liable to penalties of 10% of their total tax bill rather than 10% of outstanding tax. Does that also apply to my situation? (I don't believe it's a problem now but it would be good to know for the future).
• As a proprietary director of one company, should all my employments be classed as class 'S' PRSI rather than class 'A' as they currently are?

Sorry for the long query, but I'd really appreciate any advice.

T.I.A.

 

[Ham Slicer]

4 Questions.
Q1 - Assuming you have only been allocated 1 PAYE tax credit and not 3 for the different employments then everything should balance.
Q2 - Form 12 Correct form - Yes. There should be no need to complete Form 11. Inform Revenue that you are not involved in the company (if that is the case) - you don't draw a salary etc. They should exclude you from the need to complete the Form 11 in this situation. Call them.
Q3 - Assuming you take no income from the 33% co. there will be no surcharge.
Q4 - Class A is correct in this case

 

[yoga]

Thanks for the reply...

4 Questions.
Q1 - Assuming you have only been allocated 1 PAYE tax credit and not 3 for the different employments then everything should balance.

Revenue split my credits between the five employers I most often work with. They will only allocate credits to max of 5 employers. As I work different hours with each I do a tax return to make everything balance. And from other threads it looks like there is no problem with me claiming a PAYE credit.

Q2 - Form 12 Correct form - Yes. There should be no need to complete Form 11. Inform Revenue that you are not involved in the company (if that is the case) - you don't draw a salary etc. They should exclude you from the need to complete the Form 11 in this situation. Call them.

OK. I'll call them like you advise. The thing that still concerns me is where you ask if I'm involved in the 33% company. I'm not sure how to interpret "involved" here. I don't get any remuneration from the company, and wouldn't consider myself involved, but does being a proprietary director not imply that I'm involved?

Q3 - Assuming you take no income from the 33% co. there will be no surcharge.

No, I don't get a salary from the 33% company.

Q4 - Class A is correct in this case

Great! So does class A only apply if you are getting a salary from the company you are director of?

Thanks again!

 

[yoga]

Just as an FYI,

At this stage, more than one person in revenue had told me that I MUST register for self-aassessment and submit a Form 11 because of the fact that I am a proprietary director (and regardless of the fact that I earn nothing from the company).

They said that I am still entitied to all my tax credits, and will still pay my tax under the PAYE system, but am required to submit a tax return via form 11 every year.

I haven't yet figured if this will have any effect on my PRSI class, but I think/hope not.

 

[mandelbrot]

Just as an FYI,

At this stage, more than one person in revenue had told me that I MUST register for self-aassessment and submit a Form 11 because of the fact that I am a proprietary director (and regardless of the fact that I earn nothing from the company).

They said that I am still entitied to all my tax credits, and will still pay my tax under the PAYE system, but am required to submit a tax return via form 11 every year.

I haven't yet figured if this will have any effect on my PRSI class, but I think/hope not.

Yep you'll need to file F11.
Also AFAIK if you file late you will be surcharged on ALL your tax, regardless of whether it was all paid under PAYE in "ordinary" PAYE employments.

It won't affect your PRSI.

You'd pay self employed PRSI on any earnings from your own company, but the other employments, if they are ordinary PAYEemployments will continue to be insurable at Class A

 

[yoga]

Thanks mandelbrot, that helps a lot.

I'll make sure to get filing done before the deadline then (I'm looking at 2010 right now and I believe it's due on Oct 31). I've actually overpaid tax under the PAYE system, so I don't have any payments to make.

Thanks!

 

[Ham Slicer]

Just as an FYI,

At this stage, more than one person in revenue had told me that I MUST register for self-aassessment and submit a Form 11 because of the fact that I am a proprietary director (and regardless of the fact that I earn nothing from the company).

QUOTE]

Interesting. I've succesfully had this obligation waived in a couple of cases in the past year.

Regardless of weather you file a Form 11 or Form 12 the 31 October deadline does not apply to you really as you won't be surcharged on PAYE (non-prop' directorship) income only.

 

[mandelbrot]

Interesting. I've succesfully had this obligation waived in a couple of cases in the past year.

Regardless of weather you file a Form 11 or Form 12 the 31 October deadline does not apply to you really as you won't be surcharged on PAYE (non-prop' directorship) income only.

What district(s) was this in, out of interest?

I was asking about this earlier this year, and I was given to understand Revenue wouldn't budge on it... Good to see common sense prevailing in some places at least...

I was also given to understand that once a person is filing a F11 as proprietary director, if it's late they will be surcharged on all tax liability, and likewise there's no budging in relation to this.

 

[selfassessed]

I'll make sure to get filing done before the deadline then (I'm looking at 2010 right now and I believe it's due on Oct 31). I've actually overpaid tax under the PAYE system, so I don't have any payments to make.

Do meet that date. Sadly being in credit won't make a blind bit of difference. You would still get hit for the 10% if you miss the deadline by more than 2 months.

In the US if you don't file a return within 5 years you forfeit the refund but there is no penalty.

In the UK if you are late filing there is a flat fine of 100 pounds.

The Irish CRO has a flat fine of 300 for companies no matter what size they are that are late filing.

But self employed individuals must pay thousands of euros to Irish revenue in extortionate surcharges for late filings.

 

[selfassessed]

they will be surcharged on all tax liability

Including your wife's income too. And my wife works in the public sector so she obviously earns far more than I do!

 

[T McGibney]

The Irish CRO has a flat fine of 300 for companies no matter what size they are that are late filing.

CRO penalties are actually worse: €100 + €3 per day up to a max of €1,200 in a year.

But self employed individuals must pay thousands of euros to Irish revenue in extortionate surcharges for late filings.

At least self-employed surcharge is calculated only on self-assessment income. Company directors surcharge is calculated on all income including PAYE.

 

[selfassessed]

CRO penalties are actually worse: €100 + €3 per day up to a max of €1,200 in a year.

That isn't worse - unless you earn less than 50K a year or something like that. And for two months late it would be only €200 anyway. Surcharge could be up to 20K or something like that.

At least self-employed surcharge is calculated only on self-assessment income. Company directors surcharge is calculated on all income including PAYE.

Really? They treat self employed and directors differently?

Yet another reason not to incorporate. It's bizarre really - the incentives are all backwards in this country.

 

[T McGibney]

That isn't worse - unless you earn less than 50K a year or something like that. And for two months late it would be only €200 anyway. Surcharge could be up to 20K or something like that.

What I meant was that the CRO penalties were worse than the "flat fine of 300" suggested by the earlier poster.

Really? They treat self employed and directors differently?

Yet another reason not to incorporate. It's bizarre really - the incentives are all backwards in this country.

Blame Bertie Ahern, it was him who brought this in as Finance Minister.

 

[hastalavista]

Surcharges for late filing by Proprietary Directors [PD]

Example a:

PD has 2 sources of income.
1 is that he has income from the company of which he is a PD
2 is that he has income from employment.

Both have been subjected to PAYE on time

Example b:

PD has 1 source of income.
1 he has no income from the company of which he is a PD
2 is that he has income from employment.

2 has been subjected to PAYE on time

In both cases he files late.

This thread gives mixed messages on on what income surcharges will apply.

Having read
[broken link removed]

and [47.6.3] PAYE tax paid and Surcharge on late Returns by Directors
Extract from Tax Briefing, Issue 25 (February 1997)

which only downloads but can be got if this is googled
proprietary director surcharge site:revenue.ie

I wonder what surcharges apply in both examples

 

[Ham Slicer]

What district(s) was this in, out of interest?

I was asking about this earlier this year, and I was given to understand Revenue wouldn't budge on it... Good to see common sense prevailing in some places at least...

I was also given to understand that once a person is filing a F11 as proprietary director, if it's late they will be surcharged on all tax liability, and likewise there's no budging in relation to this.

I can't recall what district it was. From memory I think it was Fingal.

 

[Ham Slicer]

In case A a surcharge will apply to the PD element. In case B no surcharge will apply.

Example a:

PD has 2 sources of income.
1 is that he has income from the company of which he is a PD
2 is that he has income from employment.

Both have been subjected to PAYE on time

Example b:

PD has 1 source of income.
1 he has no income from the company of which he is a PD
2 is that he has income from employment.

2 has been subjected to PAYE on time

In both cases he files late.

This thread gives mixed messages on on what income surcharges will apply.

Having read
[broken link removed]

and [47.6.3] PAYE tax paid and Surcharge on late Returns by Directors
Extract from Tax Briefing, Issue 25 (February 1997)

which only downloads but can be got if this is googled
proprietary director surcharge site:revenue.ie

I wonder what surcharges apply in both examples

 

[Basil Fawlty]

Hi

Can you tell me if you managed to be a proprietary director of your own company and manager to maintain your PAYE tax credits and PRSI A stamp ?

I'm hoping to start up my own small sideline company, but work as a PAYE worker and not lost my credits.

Any advice or experience?

Basil.

 

[WizardDr]

@Basil Fawlty as @Mandletrot has pointed out:

If yoiu are a 'Proprietary Director' you CANNOT claim PAYE Allowance on income from THAT company - or some connected companies e.g. wife owns company
All your directoir payments must have PAYE operated on them at the special rate.

Thats the summary.

 

[T McGibney]

I'm hoping to start up my own small sideline company, but work as a PAYE worker and not lost my credits.

You won't lose your Employee tax credit if, and for as long as, you continue working as a PAYE employee, earning a salary of at least €8,250 per annum.

This applies no matter how much you earn as a proprietary director of another company. However you will never be able to claim the Employee tax credit in respect of earnings from any company where you are a proprietary director.