Company Director - No PAYE Tax Credit?

[oopsbuddy]

I understand that the PAYE tax credit is not available to company directors, who are paid by their own companies, as they are regarded as self employed. and therefore not entitled to the PAYE credit. However if two such individuals were to come to an arrangement whereby each one's company hired the other individual, and each company paid the other individual a gross salary of approx €4,300 p.a., this would be subject to the PAYE credit, and therefore largely untaxed in the hands of the individual (tweak the numbers to negate the tax to nil). Two things result: first, each individual will now receive more after tax cash from the gross payment because it comes from another company NOT owned by that individual (than if their own company had paid teh same gross amount to them) and secondly, a small employer's PRSI liability will arise, but this is a good thing, because it keeps the Class A contributions going, which provides much better social welfare benefits than Class S, which provides old age pension only.

 

[ClubMan]

However if two such individuals were to come to an arrangement whereby each one's company hired the other individual

Would they not have to actually do some work for this to be other than a potentially illegal tax avoidance strategy?

 

[ubiquitous]

I’m not aware of such a thing as a directors form 11.

Prehaps I can help you. As a propreitory director of an Irish resident company you are obliged to complete a an income tax return on a yearly basis. The form which you complete the is known as a form 11.

Okay then I'll rephrase, "Have you not already filed form 11 returns (as a director) for each year to date?

I recommend you return this form as soon as possible as it can sometimes hold up certain refunds etc…

The non-filing of Form 11 returns can have more serious implications for directors than holding up refunds - note the automatic imposition of a 10% surcharge on their entire tax liability (before credit for PAYE paid) which is a lot more harsh than the equivalent surcharge for late filing by self-employed taxpayers, which is calculated as a % of the tax liability after credit for PAYE paid.

 

[oopsbuddy]

Would they not have to actually do some work for this to be other than a potentially illegal tax avoidance strategy?

Of course...!

 

[capall]

You must have been making a personal tax return each year as a company director
Revenue would have applied the single person tax credit in their calculations so if you were due anything back you would have got a refund.

 

[BobbyFowler]

Called up to Revenue Offices yesterday & have a batch of Form 11's to fill out. They've given me statements of income & tax paid since 2004. I think it's just this year that I've paid myself without taking tax credits into account.

 

[ClubMan]

If it was me I would not be approaching Revenue directly about outstanding form filling or liabilities without first getting advice from a tax expert.

 

[BobbyFowler]

Have a friend who know's someone in a senior position in Revenue. Contacted them and they reckon there shouldn't be a problem.