# Subcontracting



## eddie10 (31 May 2007)

Has anyone used a contractors management company (ie. may not be using the correct term but basically they set up a Ltd company for contractors and handle all their tax affairs, administration, etc for a fee) to get round the problem of subcontracting work to self-employed people who are not Ltd? Considering going down this route to avoid taking on the burden of PAYE/Payroll for people I subcontract to. Any advice, cautions, experiences to pass on?


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## Joe1234 (31 May 2007)

Talk to your accountnat as there are a number of points raised in your post that do not make sense to me.  If you have not got an accountant, get one.


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## kkelliher (1 Jun 2007)

you cant subcontract to an employee or someone who is directly answerable to and under your control. The revenue will be down on you in a flash. A subcontractor is defined by the revenue as someone who does not work under someone elses control and can choose there own times etc etc check out revenue.ie for more details. The revenue have cracked down on this in a major way.


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## eddie10 (1 Jun 2007)

Thanks to you both for advice. I have had a consultation with a tax consultant who has advised of my options, basically treat all subcontractors as employees which isn't an option because of PAYE/PRSI burden, or getting them to set up as ltd companies which might not be feasible for some of the smaller scale jobs. therefore this management company seems the best way for me to go. And yes, all contractors will work to their own times, schedules, etc and will be results focuses so they won't be reporting to me as an employer as such. I just wanted to check if anyone had experience of dealing with such a company who takes the admin & hassel out of setting up as a ltd.


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## ubiquitous (1 Jun 2007)

I don't really see how a management company is going to help you in this scenario. Your employees (assuming they are employees) will as such have rights and entitlements that someone is going to have to bear responsibility for. Hiving all this off to another entity doesn't appear to make sense to me because ultimately you are bearing the cost anyway, except that this time you are also incurring the cost of a middleman. I would also guess that if you arrange the management company setup on behalf of these people (as opposed to a contractor setting up & running their own limited company) then they would probably be legally seen as your employees anyway if for example a dispute went to court. No simple answers here, I'm afraid.


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## eddie10 (1 Jun 2007)

I think you’re mis-understanding my position. I  subcontract work to other self-employed people most of whom are small scale and not set up as a ltd company. Therefore, to overcome this issue, and keep myself out of the PAYE/PRSI loop for them (which I couldn’t afford), I am going to refer all subcontractors to a company that sets them up as LTD and handles their entire tax affairs for a small fee of the invoice – the costs fall on themselves – I am not their employer… if anything I act like an agent referring work on a piecemeal basis.
It’s a pain-free way for them to work as a ltd co and avoid accountants fees at end of year. And I am not open to any comeback from the revenue as all subcontractors are fully compliant on the tax front.
As I said, I am interested in hearing from anyone who has experience of having their tax affairs handled in this way – any good, bad or indifferent comments to share?
Thanks.


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## Joe1234 (1 Jun 2007)

eddie10 said:


> I  subcontract work to other self-employed people most of whom are small scale and not set up as a ltd company. Therefore, to overcome this issue,.....




What issue?  If you subcontract and you operate the tax properly, then whether they are trading as a sole trader or a limited company should not be your problem.

Without offending the consultant that you spoke to, I think you need to get proper advice.  Unless I am missing something, they are your subbies, they are self employed, their tax is their responsibility, not yours.  All you have to do is complete the relevant paperwork, deduct 35% RCT from the invoice they give you, if necessary, and pay it to the revenue.


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## ubiquitous (2 Jun 2007)

Joe1234 said:


> What issue?  If you subcontract and you operate the tax properly, then whether they are trading as a sole trader or a limited company should not be your problem.
> 
> Without offending the consultant that you spoke to, I think you need to get proper advice.  Unless I am missing something, they are your subbies, they are self employed, their tax is their responsibility, not yours.  All you have to do is complete the relevant paperwork, deduct 35% RCT from the invoice they give you, if necessary, and pay it to the revenue.



From what the OP has said, I have assumed that they're not in the construction industry. If they are, then you're right but I doubt if it is that simple.


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## Figment (2 Jun 2007)

Joe1234 said:


> What issue?  If you subcontract and you operate the tax properly, then whether they are trading as a sole trader or a limited company should not be your problem.



I second this. You seem to be creating a problem where there is none. Unless there is some issue you are not telling?


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## Blinder (2 Jun 2007)

I think that what you are trying to do is what job agencies do with contractors. 

Say, I'm an IT contractor. I get a contractor job through an agency.
The agency has a contract with the company, and I have a contract with the agency. The agency stipulates that I must work under a ltd comapny. This is to protect themselves, so that I cannot be classed as an employee of the agency. I then have a choice of setting up my own ltd company, or working under an umbrella limited company. 

So there is no reason that you cannot do this. You should give your contractors a choice to set up their own ltd company or work under an umbrella company, and whatever then do, should make no difference to you.


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## Joe1234 (3 Jun 2007)

ubiquitous said:


> From what the OP has said, I have assumed that they're not in the construction industry. If they are, then you're right but I doubt if it is that simple.



RCT also applies to the meat processing and forestry industries.


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## Joe1234 (3 Jun 2007)

Blinder said:


> The agency stipulates that I must work under a ltd comapny. This is to protect themselves, so that I cannot be classed as an employee of the agency.



The revenue have criteria to decide who is an employee and who is a contractor.  In my opinion the whole procedure and responsibility of being involved in a limited company needs to be assessed before committing someones involvement in it.


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## petelomejor (3 Jun 2007)

Amused....

It seems peculiar to me that an agency would demand that a sole trader become LTD. I know many sole traders who would tell them to politely F O if they were approached to do this. 
The sole trader has always been held far more responsible and left fully liable compared to LTD companies.
Its interesting that Ryanairs CE is a sole trader along with many other Irish millionaires


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## eddie10 (3 Jun 2007)

Thanks for all the replies... very interesting and most points raised have been those I've checked out myself. However, BLINDER has qouted the situation best suiting my own. Seemingly revenue have closed in on a lot of contracting agencies (and similar types of business) and you either employ your contractors as PAYE or they are ltd, eg PM. As I was advised, someone somewhere along the chain HAS to be responsible for the full compliance with tax requirements and the revenue will most likely assign that responsibility to me being the middle-man.. I cannot assume all contractors will settle their own tax affairs. Sounds overly complicated I know and its set me back a bit in my set up as well so I'm not too chuffed at the moment.


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## Joe1234 (3 Jun 2007)

eddie10 said:


> someone somewhere along the chain HAS to be responsible for the full compliance with tax requirements and the revenue will most likely assign that responsibility to me being the middle-man.. I cannot assume all contractors will settle their own tax affairs.



Did the revenue tell you that they would hold you responsible if the others did not comply with tax law?  At the risk of repeating myself, I fail to see how you could be held responsible for (for example) my tax evasion.


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## Karenfd (3 Jun 2007)

Not too savvy on the whole tax issue myself but being addicted to reading through OP's threads (!) I thought I'd mention one of my friends experience of subbing... seems kinda similar to Eddie10. He works part time from home for an auctioneering firm preparing presentation material, brochures, etc. He has done so for over a year and submits an invoice monthly (not big bucks I'm sure). However recently he was told he had to set himself up as a registered limited company if he wants to continue receiving the work from them. When queried, they said they had to enforce this or take him on as a part time employee which they weren't prepared to do. Haven't been onto him since so don't know the outcome. Best of luck with it all anyway


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## eddie10 (3 Jun 2007)

No, Joe1234, just going on the advice I've received from tax consultant to date. Very interested to read that most people have disagreed with her though, which gives me food for thought. KarenFD - would like to hear more about your friends situation if you, or s/he feel like PMing me.
Thanks


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## Joe1234 (4 Jun 2007)

eddie10 said:


> No, Joe1234, just going on the advice I've received from tax consultant to date.



Then I really think that you need to talk to a different advisor, in case you get a different answer.  You could also check with revenue directly to see how they view the matter.


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## eddie10 (4 Jun 2007)

Yep will do. I'll update the thread as soon as I have solid clarification. Thanks for all the input.


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## Joe1234 (4 Jun 2007)

Looking forward to hearing how it all progresses.


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## Domo (6 Jun 2007)

The Revenue have rules as to who is an employee and who is a contractor.  If you are working full time for one company/individual, and your conditions indicate that you are an employee - you are an employee - and the company is the one who the Revenue will come back at if they do not treat you as an employee and operate PAYE/PRSI.  This would be the case if you considered yourself self-employed (not working through a Ltd company).  Please also note that the Revenue could also come back to the individual also, but this does not usually happen.

An aside on this is that treating individuals as employees protects their rights under employment law, etc (redundancy payments, certain Social Security beneifts etc).

However, using a Ltd company gets employers out of this situation as you are then providing services through a company rather than personally.

However, I would point out that the Revenue will at some point hit this, and it is not guaranteed forever, but at the moment they do not attack such set-ups, and there is no guarantee that they will not do so.

Note that in the UK, the UK Revenue brought in IR35 rules for sub-contractors using Ltd companies, through legislation, looking through the company directly to the individual.

I would guess (and this is only a guess) that the Irish Revenue will follow suit on this at some time.


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## eddie10 (7 Jun 2007)

Thanks Domo. That's similar to the advice I've been given by a tax consultant. The problem I'm facing is the cost & administration of  handling PAYE/PRSI for the people I use. Its small sporadic projects (mainly marketing & admin) and we're not talking big bucks. Some of my clients are small retailers who want, for example, a promotional campaign devised and then they may implement it themselves. I've used others to co-ordinate a corporate event - once that's done, I've no more work for them (for a while at least). So I'm not talking a big agency here - its small scale work on a very piece meal basis... doesn't make sense to me to set up all these people as PAYE when they may only work once, or, very randonly for me?


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## BOC_ARDEE (15 Jun 2007)

Hi Eddie,

Prima management (www.prima.ie) in Dublin will set this up for you and manage all accounts etc for a monthly fee. They basically have their own company registered and make everyone a sub contractor of this company. They look after PRSI/PAYE returns annually etc for around €130 a month.

Think they specialise in IT contractors though....


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