Contractor & Self Assessed Taxation

M

mamto2

Registered User
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Hi all,
Recently started contracting position and have been informed I need to look after my own tax affairs (was not informed of this when I took job). This is all new to me so whats the best way to go about this, do I register as a sole trader? Also my husband and I are assessed as a married couple will this have any implication? Presumably I dont pay anymore in taxes than what I normally pay had the job looked after the taxation end of it?

Thanks
 
Hi there,

You will need to register with the Revenue as a sole trader (TR1 form I think) and if you will earn over the VAT threshold you should be chargin VAT on your invoices and doing a VAT return bi-monthly.

You will lose your PAYE tax credit but will be able to deduct certain expenses from your taxable income, for example:
1. Home office costs
2. Mobile phone costs
3. Wear & Tear on your car (to a max of €24K @ 12.5%) - obviously some of your car will be used for personal use so the % of your car costs relating to business is tax deductible.
4. Other business expenses such as stationery, car parking, lunches etc ONLY IF THEY ARE INCURRED WHOLLY & EXCLUSIVELY in the course of your business (note that lunch at your 'normal' place of work is not deductible)

The VAT paid on your business expenses should be deducted from your VAT received on your invoices.

A couple of questions I'm not sure about - maybe someone else can advise?
1. Can you deduct VAT on petrol/diesel?
2. Tax and servicing on your car - does the wear & tear allowance cover these or are these deductible also?

Hope this helps a little!

Good luck with the contracting...
Z
 
mamto2 Contractor & Self Assessed Taxation
Presumably I dont pay anymore in taxes than what I normally pay had the job looked after the taxation end of it?
Click to expand...

You lose your PAYE tax credit as zippy said but you also pay a lower rate of PRSI too. The self-employed pay only 5%.

But you should be aware of the implications to your social welfare entitlements too. Self-employed people aren't entitled to as many benefits as PAYE employees. (Class S vs. Class A PRSI rates). If you are going to be contracting long term you should check this out.
 
zippitydooda said:
...1. Home office costs
...
Click to expand...
Be very careful here as there may be tax implications if you come to sell your home.

See some previous posts regarding "home office" scenarios and consult a tax advisor.
zippitydooda said:
...
3. Wear & Tear on your car (to a max of €24K @ 12.5%) - obviously some of your car will be used for personal use so the % of your car costs relating to business is tax deductible....
Click to expand...
This should read "motoring costs". You will need to keep track of these and your business mileage (in your appointments diary?) Your tax advisor will pro-rata them based on your total annual mileage up to the maximum above for business mileage.
zippitydooda said:
...
A couple of questions I'm not sure about - maybe someone else can advise?
1. Can you deduct VAT on petrol/diesel?
2. Tax and servicing on your car - does the wear & tear allowance cover these or are these deductible also? ...
Click to expand...
See "motoring costs" above.
 
mathepac said:
This should read "motoring costs". You will need to keep track of these and your business mileage (in your appointments diary?) Your tax advisor will pro-rata them based on your total annual mileage up to the maximum above for business mileage.
Click to expand...

Is there a restriction on claiming for mileage for getting to and from work itself?

Thanks
Sprite
 
mamto2 said:
Hi all,
Recently started contracting position and have been informed I need to look after my own tax affairs (was not informed of this when I took job).
Click to expand...

This sounds extremely dodgy. You took on a post expecting a regular salaried job. Instead you ended up being treated as a contractor. If this is the case you should seriously review your position and evaluate the trustworthiness of your "employer".
 
I certainly agree with , The revenue will not let work as a contractor, for just one company full time. ( unless you do only a few hours, with no regularity, a month). The revenue is clamping down on this. The PRSI is at 3% instead of 5% + employer bit (7% i think) so you get just about nothing... ALSO as self employed you have to provide your own liability insurance (about €700 a year) to insure yourself on the customer site +you need Professional indemnity insurance (difficult to get and about €1500/Y) to protect yourself form any mistake you may do in your duties which could cause loss to your customer. Also your car insurance may need to be different, because your customer is not your work it's you visiting a customer. Also you get NO paid holidays, NO benefit leave, and obviously NO labour right.
I have been SE for 3 years, and you need to turn a lot of cash to make it worth while.
 
Thats seems strange to me considering I worked exclusively for 10 1/2 years from a multi national in Ireland and my accountant never raised any concerns. Although he did point out that if you commute from your office to the client office you cannot claim expenses after 6 months (this also goes for all food expenses etc)
 
From your original post I'm not sure what your problem is. On accepting the job did you not realize that this was a contracting job or did you not realize that contractors are responsible for their own tax???
 
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