Class S and PAYE Credit

As a director of a company I pay Class S rate of PRSI. This does not entitle me to "normal" SW benefits, but you may apply for means-tested allowances.

As I have never paid any other PRSI classes I assume this will affect my state pension (I am currently in my mid thirty's)

I work in the software industry as does a brother of mine who also run his own company (no current company relationships), Can we employ each other as employees and pay each other lets say €10K

Would this mean we can claim the extra tax PAYE credit?
Would this mean I can work up stamps for a state pension?

Personally this sounds like it would raise some eyebrow's of concern from both our accountants and the tax man, am I correct and for what reasons?

CLASS S BENEFITS

• Widow's or Widower's (Contributory) Pension
• Guardian's Payment (Contributory)
• State Pension (Contributory)
• Maternity Benefit
• Adoptive Benefit
• Bereavement Grant

You will get a state pension (see above).

You will receive a pension as above. I would be more worried about you're lack of social welfare benefit if you cannot work due to illness or accident etc. If you haven't already done so you should seriously consider taking out an income protection policy. It shouldn't be too costly as it looks like you have a class 1 occupation and your company can write off the premiums as an expense. For disclosure reasons please note that I am a broker.

www.powerinsurances.ie

locutas said:

Personally this sounds like it would raise some eyebrow's of concern from both our accountants and the tax man, am I correct and for what reasons?

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Sounds like you are afraid of your accountant! The only way your arrangement could work is that there would be a contract of employment and that actual work was undertaken. Due to the apparent look of this arrangement there would be a high risk of the arrangement being questioned. You would need to show a paper trail, diary entries, rosters, etc that each of you worked for the others companies. Perhaps Ubiq. or clubman might confirm if there is need for any minimum weekly number of hours that need to be worked. I seem to recall something but this may have been in my previous English experience.

I would share simplyjoe's concerns that such an arrangement would be likely to attract Revenue attention, ie audits. In such a scenario they would be likely to attack the arrangement as an artificial tax-avoidance scheme, and seek to cancel any benefits gained by the parties to the deal.

Afaik, there is no set minimum number of hours worked requirement to make such a deal valid, but even if either party was genuinely working for days/weeks on end for the other, the risk of Revenue attack would be so strong that I would be very reluctant to recommend such an arrangement.

The OP should discuss this issue with their accountant. They will know the OP's situation much better than any of us.

Provided an expense is incurred "wholly and exclsuively for the purposes of the trade" then this satisfies Revenue criteria for allowing it as a tax-deductible expense.

As regards you and your brother working for each others company, Revenue may take a dim view of the reality of the situation and insist that in fact the work which is being carried out is in fact subcontract work from one company to another but sometimes these things depend on your Revenue auditor and the mood he/she is in on a particluar day!