Starting a Ltd Company

S

stickman1019

Registered User
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So currently I am working as a Engineer for the last 5 years under a Umbrella company formation.
I am toying with the idea of starting a Ltd company.



Currently I receive a payslip every month which Contracting Plus remove the required PAYE USC and PRSI from.
This has suited me up until now as I needed the excess money for jobs on my recently purchased house.


Still in the early research stages but from what I can see the general advise is:

  • Start Directors Pension
  • Takeout money to cover bills and living expenses;
  • Leave as much in the company as possible to reduce tax bill

Looking to put some rough figures on this last year my wages looked like


Gross = 95k
Directors Pension = 12k
Net = 54k
Savings = 23k
Living & Bills = 21k
House = 10k

Assuming that my house needs no money & I dont put anything away for savings this year I would only need to take a wage from the company to cover my 21k of bills and living expenses.

So my figures would look like the below.

Gross = 95k
Directors Pension = 12k
Net = 21k
Living & Bills = 21k

This would mean a large surplus left in the business.



My real query is what happens to this money ?

Must I pay corporation tax on this or can this be invested into to things like ETF's and share schemes?


If I lost my job and needed access to it Can I access it?


When can I take it out 5 years or retirement age and what the tax burden when I take it out.



Apologies if these questions seem basic any help is appreciated
 
You need to talk to an accountant here and discuss your ideas in general. The umbrella company can work but is expensive if you are doing it for a prolonged period of time. It is worth you setting up your own company and then either you (or your accountant) can handle the Vat, PAYE & corporation tax (accountant most likely on this one). Living & bills aren't an allowable deduction so you would take this out via salary.
 
Stick,
ContractingPlus could advise on many of these questions, if you are planning to contract for a few years then serious consider the move to a limited company.
I started with an umbrella and moved to a Limited company once I got a feel for how long I would be doing it.

Lets Say you have 30k left over in the company at the end of the tax year. Your options are :
1) Take it out as PAYE
2) Place Additional funds into the pension. With the changes to PRSA this is what you would use, single executive schemes are kind of gone now.
3) Leave the funds in the company and pay 12.5% corporation tax and 7.5% Professional Services fee (on the amount after CT).
If you keep the business going for a min of three years you can claim entrepreneurs relief(reduced 10% CGT on the amount in the company). If you keep the business for 10 years and if you are over 55 you can claim Retirement relief(0%CGT)
4) Buy car - The real benefits of EV are tapering out now but still for the next couple of years there is reduced BIK
5) Buy ETF/investments - Avoid for us small rollers! Not deductible so value is liable for CT and any income is taxed at 25%. 15% Professional Services fee if left in the company for 18mths.

Berkley Recruitment/Icon have a great video on youtube that explains point 3 - Entrepreneurial Relief | What Contractors Need to Know
There are liquidation fees. I have previously been quoted about €6k but Icon say €3k.


If I lost my job and needed access to it Can I access it?
Click to expand...
Can you not get another contract role?
With the limited company you have to wind it down to access money you have squirrelled away in the bank account.
 
Last edited:
Savvy said:
To be honest that's not something I've even looked into, it was just the advice from my accountancy firm!

Is it a straight forward procedure to wind down the company?
Click to expand...
Yes, a company strike off is a few hundred Euro so long as there are no assets/liabilities in the company.
 
A few queries in relation to the Ltd co, Can you buy a share in a property with the funds in the LTD Co ?
So when you reach 55 how does retirement relief work assuming you have the Co running for ten years plus ?
If you have a spouse what happens to the Ltd co funds if you die before you retire ?
 
Just make sure you know what entrepreneur relief covers, it covers disposal of qualifying business assets and specifically excludes shares, securities, development land, so it looks like it only qualifies if you sell your shareholding in the company to someone else,

Seek professional advice if you are thinking of leaving cash in the business to make sure you have a solid exit strategy
 
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