Contractor question

S

States

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I'm an IT contractor and have set up a limited company of which I and my wide are directors.

I want to pay myself a monthly salary and had some questions related to this and any deductions I can make to reduce my tax bill.

I have received my Tax Certificate from the Tax office so that clear on my the band and rates of tax for me.

My question is around any expenses claim I can make. Some of the other contractors I'm working with are claiming travel expenses for the daily trip to and from the office and have been on contract for nearly a year now. They are also claiming for daily subsistence. One of the guys has set up as a sole trader and in invoicing a company that he is a director of.

Q's
a. Is it OK to claim these travel & subsistence expenses?
b. Does anyone see an advantage of seeting up as a sole trader and invoicing a company that your a director of?

Finally, am I right in thinking that genuine expenses are deducted from the gross salary and tax is payed on the remainder?

thanks in advance for any help.
 
I work as an IT contractor and I don't believe the travel expenses are OK. It depends what is their "normal place of work". If you're based at home and travel to the office occasionally then that travel is claimable but if you work all the time for one client then I don't believe the travel from your home to work is claimable. I've been told if contracts are 3 months or so in lenght and you move around then you've a case for mileage. Mileage to interviews, appointments with your accountant or bank or similar would be OK if it's to do with your company. I think.

The subsistance question - I know some contractors pay €15 per day for subsistance. I'm not sure how legitimate this is and would like to know.

If you're operating as a Limited Company to get your max salary you take your operating expenses from your total incomings. Expenses would include setup fees, accountanct fees, mobile phone expenses, whatever mileage and subsistance, books, software, hardware (all of which you keep invoices for). Whatever is left you can pay yourself as a salary. Any balance left over is the company's profits which tax is paid on at 10% which you generally want to avoid unless you've some use for money in the company going forward. Generally a zero profit for the company each year is what you want but your accountant would advise on that.

On you question B I've no idea what the advantage of that would be
 
Thanks for your repsonse.
I understand that a pension plan can be set up for a limited company with some favourable conditions. do you have any info on this?
My understanding is that there is no limit as to how much the company can put in the plan. Are there any tax implications? if not, I guess it's good place to invest so that as you say, there is not profit left at the end of the year.
 
My question is around any expenses claim I can make. Some of the other contractors I'm working with are claiming travel expenses for the daily trip to and from the office and have been on contract for nearly a year now. They are also claiming for daily subsistence. One of the guys has set up as a sole trader and in invoicing a company that he is a director of.
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Brouhahaha is spot on. Travel to your place of work if you are on-site virtually all of the time (as most contractors are) is not claimable. Irregular travel, occasional trips to a client site, bank, accountant, is all claimable. The rate is based on your car and your accountant can advise you on the correct rate, or you can get it from the Revenue Site. (I always run things by the accountant even if Revenue tell me something).

If it will help here's how I operate:
I pay myself a regular monthly wage, regardless of how many hours I work in a given month. It's much simpler to pay yourself the same amount, and pay revenue the same amount each month. I try to keep my wages small to maximise the profits of the company, and then I try to get the profits out of the company in the most tax efficient methods I can.

As for expenses I go with receipts or visa statement and I only expense exactly what I spent. I believe there are standard allowances that can be paid as an alternative to this vouched method, but you must pick one way or the other.

I fill out an expense statement once a month from me to the company listing the expenses I'm owed. I then write a cheque from the company to me for the amount of the expenses. It's as simple as that.

You are correct as a director of a Ltd company you have certain advantages in the area of Tax planning, and Pension planning. If you can clear about 20K profit a year after paying yourself and covering expenses then you might consider a Self Administered Retirement Trust. Check out WWW.FEN.IE for more info on that. There are other Pension options too, but SART's are very attractive if you can generate a lot of profit, and you see contracting being a long term situation.

The number 1 thing you need above all else is a good accountant.

I have seen all sorts of strange behaviour by IT contractors over the years and I would question the legality of some of the things I've seen. I've never heard of an IT Contractor being audited.

There are stories of AGM's being held in Orlando, Rome, Paris etc. where husband and wife are the board of directors. I don't know if any of these stories are true.

I do scan the list of international software conferences regularly to see if there are any exotic locations that I'd like to visit on the company dime so to speak. Next year I hope to spend a month in Chile studying salmon fishing.

-Rd
 
I'm always coming across contractors who reckon they can claim this or that, or chrage themselves rent for using a room as an office or whatever. Basically it's all perfectly claimable until the revenue take an interest. Like Daltonr, I've never heard of anybody being audited, but I wouldn't advise veering too far from the rules.
 
I was hoping to claim for car insurance and car tax and some new tyres I had to purchase recently. Is this possible?
 
States,

There are pretty generous mileage allowances which are intended to cover the wear and tear and cost of motoring. So, no you won't be able to claim on top of that for the Tax, Insurance, and Tyres etc.

I'm always coming across contractors who reckon they can claim this or that, or chrage themselves rent for using a room as an office or whatever.
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You can charge yourself rent if you own the house and you have an office in it which is used for running your business. BUT. Where it gets tricky is where you actually work 5 days a week 9 to 5 in the office of your client, as many contractors do. And the Office that you claim is for your business is actually little more than a study, that's used by the whole family.

Basically people know themself if the thing they are claiming as an expense was actually for business use. If a good case can be made that it is for busienss use then it's claimable.

For example I currently work at home, so obviously my company pays rent for it's office space. When I was renting a house I also ran the business out of the house I was renting, but I was spending a lot of time on-site. You just need to try to apportion out what is fair. Even if you only use the office in the evenings, the company should still make some contribution, since you are usign up that room to hold your computers, files, etc. The Business is still consuming some of your electricity etc.

There are two kinds of contractors. Those who try to get away with anything they can, and take pride in the most un business related expense that they managed to get covered.

And then there are those to expense as much legitimate stuff as they can, bu don't push their luck. In some cases these legitimate expenses don't seem so legitimate to Lay People. But as long as they are legitimate there's no worry.

-Rd
 
If your company is paying you rental income, I imagine you personally are liable for income tax, is that the case? I dont think the rent a room scheme would apply, as only individuals are covered. I seem to recall someone once saying to me that there might be a CGT implication when selling your house, does anybody know if this is true or not?
 
The person I share the house with is the owner and yes there is an income tax liability.

I assumed that when I bought a house there would be a personal income tax liability, but I'll cross that bridge when I come to it and let you know. I hadn't given it much thought, but you are probably right about the rent a room scheme.

-Rd
 
Renting out part of a PPR to one's own company is OK if the property is rented from someone else but otherwise it is a bad, bad idea, mainly because of the negative CGT implications.
 
Renting out part of a PPR to one's own company is OK if the property is rented from someone else but otherwise it is a bad, bad idea, mainly because of the negative CGT implications.
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That's an interesting angle on it. If you are paying income tax on the rental income then you might as well just increase your salary by the amount of the rent.

-Rd
 
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