Starting role as contractor

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AOH77A

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Hi, Looking for some advise on what is the best way forward. Should I set up limited company and manage tax myself or use a PAYE umbrella company.
 
Your options are to operate as a self employed or set up a company.

If you are a self employed sole trader you make an annual return on form 11 and pay tax each year at end October.

If you set up a company and the company employs you, the company must operate a paye regime for you (and pay 10.75% employers PRSI)
 
Taxpert said:
Your options are to operate as a self employed or set up a company.

If you are a self employed sole trader you make an annual return on form 11 and pay tax each year at end October.

If you set up a company and the company employs you, the company must operate a paye regime for you (and pay 10.75% employers PRSI)
Click to expand...

My reading is that OP is looking for advice on the third option - use an umbrella company.
 
sorry this by mobile phone

im not am accountant
i setup a ltd co. in jan.

i employ myself

im a director owner you dont have to pay employer prsi thats misleading as i see it

my wife did the umbrella director approach last year and stopped. the net take was 40% quite bad no incentive even if on a daily rate

i find i can get this down to 32 to 35% overall tax take with a ltd co. and daily rate. thats a bit better but not groundbreaking
 
I haven't checked the detail of the employers PRSI. I think if t/o is below a certain level the 10.75% may not apply (in full, at any rate).

But, and I'm subject to correction on this, I don't think the fact that it's director owned makes any difference.

I'd double check the PRSI thing if I were you. The last thing you want is a retro claim in about 3 years time, plus interest, plus penalties etc.

On the more general point, there is a rough rule of thumb about incorporation which is sometimes used. It's basically that when ones income exceeds what you would expect to earn as an employee maybe it's time to incorporate, or examine it anyway.
 
I've worked with daily rate contractors, both with their own limited company and those using umbrella companies.

I've found those using umbrella companies to be a lot more restricted in what they can do. When the want to set up a pension, they can't use the company as a trustee, they have to get someone else to sign the DDM. Not as easy to pay fees from the company. Those with their own company, can sign the cheques, so don't have to ask permission to do anything (obviously within the law).

The cost of setting up a company is very cheap. And if you are contracting on something like daily rate, the cost of doing you accountants should be pretty cheap too. All you have is the invoice each month and mobile phone bill. There tends not to be very much activity in the accounts so there's very little work to be done.

If you are going to contract for a number of years, the limited company route will probably work out cheaper.


Steven
www.bluewaterfp.ie
 
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