# Company Directors & the PAYE tax credit



## trigger (15 Oct 2008)

As an contractor I'm a 50% shareholder/director in my company. I've only just found out that I'm not eligible for the PAYE tax credit. Does anyone know the logic behind this?

As a regular PAYE employee of the company the only tax difference as far as I knew was that I had to pay class S PRSI. Why are directors not eligible for the PAYE tax credit? It's not like I can take tax free money out of the company any other way.


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## papervalue (15 Oct 2008)

This has been the way for a long time. I think you would get the credit if your shareholding is under 15%. 

Not been entitled to credit is not advertised enough. Revenue included it in tax free certs in the past and when you were doing a balancing statement for the year you became liable for it. 

Not sure of logic, maybe it is to do with class s as director are seem as self employed to an extent.


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## Graham_07 (15 Oct 2008)

Self-employed (sole traders / partnerships) are not entitled to the PAYE credit. a company director with in excess of 15% shareholding is considered "proprietory" akin to self-employed and is treated the same way. 

There has been another thread on this on AAM recently.


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## trigger (15 Oct 2008)

Sounds a bit unfair to me. Is there some tax offset/deduction that means directors don't need the PAYE credit? Why would directors be treated differently to any other PAYE worker?


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## ubiquitous (15 Oct 2008)

trigger said:


> Sounds a bit unfair to me. Is there some tax offset/deduction that means directors don't need the PAYE credit? Why would directors be treated differently to any other PAYE worker?



Because our civil servants, media and political establishment tend to think of Arthur Daley and Delboy Trotter when they think of company directors. I'm not joking...


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## trigger (15 Oct 2008)

ubiquitous said:


> Because our civil servants, media and political establishment tend to think of Arthur Daley and Delboy Trotter when they think of company directors. I'm not joking...



Well put. I had horrible a feeling it was down to something like that. If only I was half a ballsy as Delboy


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## hikicker (15 Oct 2008)

I got stung for that as well last year. It is very unfair. Just pay yourself the €1,760 as a subsistence payment (on a monthly basis) which is tax free. At least that way you can enjoy some of the perks enjoyed by those dossers in the civil service


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## ubiquitous (15 Oct 2008)

hikicker said:


> . Just pay yourself the €1,760 as a subsistence payment (on a monthly basis) which is tax free.



If you do this, and the Revenue give you a hard time in justifying your claim, you will be paying interest and penalties on top of the tax you have "evaded" in doing so.


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## hikicker (15 Oct 2008)

You can claim €144.45 per night as a legitimate expense for an overnight stay, €43.15 fo a 10 hour rate and €17.60 for a 5 hr rate. All of this can be claimed without receipts once a record is kept. It, along with mileage is a very easy way of taking money tax free from one's company whilst avoiding lining the pockets of our wonderful government. As a contractor, I imagine Trigger would be out on the road a lot and therefore be able to claim these expenses very easily. I do it myself and take great pleasure in the fact that I only contribute to my own pension rather than the inefficient and lazy public sectors pension fund!


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## ubiquitous (15 Oct 2008)

hikicker said:


> You can claim €144.45 per night as a legitimate expense for an overnight stay, €43.15 fo a 10 hour rate and €17.60 for a 5 hr rate. All of this can be claimed without receipts once a record is kept. It, along with mileage is a very easy way of taking money tax free from one's company whilst avoiding lining the pockets of our wonderful government. As a contractor, I imagine Trigger would be out on the road a lot and therefore be able to claim these expenses very easily. I do it myself and take great pleasure in the fact that I only contribute to my own pension rather than the inefficient and lazy public sectors pension fund!



If you are on the road, the expense allowances are good, but you won't get rich on them, not unless you have free accommodation. You will do well to make a profit from €144 for a hotel room, dinner, breakfast and lunch for any 24-hour period.


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## hikicker (15 Oct 2008)

You're missing the point Ubiquitous. Use your imagination, claim for an overnight stay whether you are down the country or not. You don't need to provide receipts therefore you can say you were travelling the country throughout the week. All I'm saying is it is an easy way to take money out of the company tax free, I know it's not going to make anybody super rich but it is a way off offsetting the PAYE tax credit. Also as a Director the company can put as much as you wish into a pension plan (from company revenues) and this is probably viewed as a perk which lead to the removal of the PAYE tax credit for proprietry directors


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## z103 (15 Oct 2008)

hikicker - this is very practical advice, and advice I believe people should do in adverse anti-enterprise climate we have in ireland.
However, I don't think we are allowed to offer this type of valuable advice on AAM. I could be wrong though.


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## ubiquitous (15 Oct 2008)

leghorn said:


> However, I don't think we are allowed to offer this type of valuable advice on AAM. I could be wrong though.



No, you're right because its tax evasion and it is illegal. Ironically its effect is also to justify  the prejudice I highlighted earlier:



ubiquitous said:


> our civil servants, media and political establishment tend to think of Arthur Daley and Delboy Trotter when they think of company directors.


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## hikicker (15 Oct 2008)

Ubiquitous, I'd like to point out that as a company director of a company started up in the past 5 years I:

Am not entitled to a PAYE Tax credit
Will not be entitled to social welfare should the company fail
pay tax on my income, dividends and company profits
pay vat in advance of actually receiving payment for invoices 
Pay preliminary corporation tax in advance of making any company profit
Have invested and risked my own money (which had already been taxed as paye income)
Pay rates, water charges, and inflated waste charges.

Forgive me if I think it is acceptable to claim subsistance at rates enjoyed by the civil service. I get very frustrated by the fact that Entrepreneurs take on a lot of risk and get very little support by the government. On the otherhand, public sector workers enjoy job security for life, unbelievable pension benefits and have little or no accountability. When are the government ever going to bloody realise that it is people like us that should be rewarded for our hard work and enterprise and NOT the absolute tossers in their cushy jobs within the public sector. I personally am going to continue to explore every allowance available (subsistance, mileage allowances, pension contributions) in order to avoid contributing to Lenihan and his asoociates and I recommend that everybody else should as well


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## z103 (15 Oct 2008)

Excellent post Hikicker.
However 


> and get very little support by the government.


What support?  I would say no support. In fact I would say that the government hinders enterprise.


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## moondance (15 Oct 2008)

Agree whole-heartedly with hikicker. Well said.


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## ubiquitous (15 Oct 2008)

hikicker said:


> Ubiquitous, I'd like to point out that as a company director of a company started up in the past 5 years...



Fwiw, I'm in the same boat as you, and share your concerns.

However that does not alter the fact that if the Revenue subject you and your company to audit and they take issue with the validity or otherwise of expenses & allowances you have claimed, they will have no hesitation in disallowing same, charging you the tax, helping themselves to interest and penalties, and also putting your name in the tax defaulters list if the total is high enough


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## hikicker (15 Oct 2008)

I work nationwide therefore can account for every expense I claim for. That said, I rarely stay overnight yet claim for it. There is no way that they could find out as:

A receipt is not required.
A signed worksheet from the work carried out proves I was in the area.

€144.45 tax free, cha ching!


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## ubiquitous (15 Oct 2008)

But...



ubiquitous said:


> If you are on the road, the expense allowances are good, but you won't get rich on them, not unless you have free accommodation. You will do well to make a profit from €144 for a hotel room, dinner, breakfast and lunch for any 24-hour period.



To pretend otherwise is either mistaken or bravado, in my book.


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## z103 (15 Oct 2008)

> However that does not alter the fact that if the Revenue subject you and your company to audit and they take issue with the validity or otherwise of expenses & allowances you have claimed, they will have no hesitation in disallowing same, charging you the tax,



I would suggest that if you're 100% straight laced, with no grey areas, you'll still get crucified.


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## hikicker (15 Oct 2008)

All I'm doing is pointing out to the original poster that as a director he can claim certain expenses tax free which can ease the pain of losing the PAYE tax credit. From my rant above, its clear that I think he is more than entitled to do so.


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## Graham_07 (15 Oct 2008)

leghorn said:


> I would suggest that if you're 100% straight laced, with no grey areas, you'll still get crucified.


 
FWIW I have had two clients recently who were subjected to comprehensive Revenue Audits across all tax heads including directors own returns. In both cases Revenue walked away empty handed. ( despite there being some, albeit not many, grey areas ) I can only attest to fair and level handedness in Revenue's dealings with those cases.


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## Nicky (16 Oct 2008)

A receipt is not required.
A signed worksheet from the work carried out proves I was in the area.

€144.45 tax free

Where can I read that, to be sure, please ?


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## hikicker (16 Oct 2008)

Nicky, it has actually gone up slightly since July. 

http://www.finance.gov.ie/viewdoc.asp?DocID=5327


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## Nicky (16 Oct 2008)

Thanks a lot Hikicker for the very useful info, just wonering there are A cass and B class, what is the defference beetwen them ?


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## davbre87 (4 Dec 2008)

hikicker said:


> Ubiquitous, I'd like to point out that as a company director of a company started up in the past 5 years I:
> 
> Am not entitled to a PAYE Tax credit
> Will not be entitled to social welfare should the company fail
> ...



Sorry for bumping the thread, but I noticed something that alarmed me a little.

I started a company within the last year, own 100%, and am one of two directors. I am an employee of the company and pay PAYE and PRSI. Is it true that if my company fails I would not be entitled to social welfare?? This struck me as odd. Am I misunderstanding something?


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## ubiquitous (5 Dec 2008)

davbre87 said:


> This struck me as odd. Am I misunderstanding something?



You're not. The logic for this is that you are not paying employer Prsi.


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## davbre87 (5 Dec 2008)

Thanks for the clarification Ubiquitous.

David


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## oopsbuddy (5 Dec 2008)

As also stated in previous posts on this topic, your company can always develop a symbiotic relationship with another company with similar owner/directors, who are also not entitled to the PAYE credit. If your comany can justify employing that owner/director as an employee and can pay him/her just enough gross income (should be around €5k p.a. I think) to cover the PAYE credit, and his/her company can also justify doing the same for you, this will enable each owner/director to build up the necessary Class A PRSI record as an employee to enable social welfare entitlements. Each company can reduce the gross salary payable to its own owner/director by the amount it pays to the other individual, so that it's mostly cost neutral. However, as also stated previously, there must be a genuine service provided in exchange for the salary!! If there was no service provided, I am sure it would be disallowed, but if a service is provided (creata a contract of employment for example) your company (and theirs) can hire anyone they like to provide this service.


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## ubiquitous (5 Dec 2008)

Graham_07 said:


> FWIW I have had two clients recently who were subjected to comprehensive Revenue Audits across all tax heads including directors own returns. In both cases Revenue walked away empty handed. ( despite there being some, albeit not many, grey areas ) I can only attest to fair and level handedness in Revenue's dealings with those cases.



My own experience in relation to recent audits has been similar to this.


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## Lobby (9 Dec 2008)

Not that it's much but every little helps, remember that as an employer/employee you can give yourself a €250 "bonus" at Christmas (well anytime actually but only once a year) without paying PAYE/PRSI. The only condition is that the payment must be in vouchers and a receipt for the vouchers kept.


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## ubiquitous (9 Dec 2008)

Lobby said:


> Not that it's much but every little helps, remember that as an employer/employee you can give yourself a €250 "bonus" at Christmas (well anytime actually but only once a year) without paying PAYE/PRSI. The only condition is that the payment must be in vouchers and a receipt for the vouchers kept.



I wouldn't take this as absolute gospel, if I were you. At best, its application to proprietary company directors is a grey area.


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## Lobby (9 Dec 2008)

ubiquitous said:


> I wouldn't take this as absolute gospel, if I were you. At best, its application to proprietary company directors is a grey area.


 
From http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/overview.html#section3

"Where an employer provides an employee with a small benefit (that is, a benefit with a value not exceeding €250 (€100 up to 31st December 2004), PAYE and PRSI need not be applied to that benefit. This treatment does not apply to cash payments, which are taxable in full. No more than one such benefit given to an employee in a tax year will qualify for such treatment. Where a benefit exceeds €250 in value the full value of the benefit is to be subjected to PAYE and PRSI."

I admit there's no mention of the position wrt directors as employees, but I doubt the revenue would squabble over €250 once a year. Neither does my auditor. 

Why do you think otherwise?  (Sorry slightly OT)


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## ubiquitous (9 Dec 2008)

Lobby said:


> I admit there's no mention of the position wrt directors as employees, but I doubt the revenue would squabble over €250 once a year. Neither does my auditor.



Well if you're happy to take the risk, fair play to you. I just don't think its worth risking getting on the wrong side of the Revenue for the sake of such a small benefit, given that it is a grey area. And, yes, I have seem Revenue audit officials getting their knickers in a twist over similarly tiny sums.

(Btw, why are you not availing of audit exemption? This would save you much more than the tax on €250.)


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## Lobby (9 Dec 2008)

I can't avail of audit exemption - sadly not for the turnover amount though! It's required for membership of IAVI.


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## ubiquitous (9 Dec 2008)

Fair enough.


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## churrusco (17 Dec 2008)

Hi all, 

Very interesting thread. I did not know that if the company fails you are not entitled to PRSI. What does it mean "fail" in this context? 

I was thinking in closing my company next year as we are going back to our country. Is that considered "failure"?

Cheers.


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## Graham_07 (17 Dec 2008)

churrusco said:


> Hi all,
> 
> Very interesting thread. I did not know that if the company fails you are not entitled to PRSI. What does it mean "fail" in this context?
> 
> ...


 
Class S contributions mean that you do not get any Jobseekers benefit if you are not employed. So if the company ceases paying you through it ceasing to trade (for whatever reason), you cannot apply for a Social Welfare unemployment payment using Class S. You may, depending on means testing etc. qualify for some form of social welfare assistance.


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## simplyjoe (17 Dec 2008)

churrusco said:


> Hi all,
> 
> What does it mean "fail" in this context?
> 
> ...


 
Best of luck back home. I hope some day that Ireland will again be attractive enough to make people want to come to our country to work and live.


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## churrusco (18 Dec 2008)

OT: Thanks simplyjoe. Do not worry it is still attractive enough. It is only that the weather is not so attractive to the female genre


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