Director/Shareholder : tax credit/prsi

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Chas Dickens

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My circumstances changed recently.
Moving from secure employment - in to contract work - I formed a limited company.

My company shareholders are myself and my wife (50/50 split).

I registered my company for tax - and last week I received a tax certificate showing that my tax credit has been more than halved, and my PRSI Class is S1 changed from PRSI Class A1.

I want to maintain PRSI payments under Class A1.
I contacted the Revenue and they told me that in order to maintain my PRSI A1 status, I would have to reduce my shareholding to lower than 15%.

Does anyone know what I have to send to the Revenue in order to get my classification changed?

Thanks
 
As you say you have to reduce your shareholding to less than 15%, so do that and show them evidence of same.

However, why do you want to be on class A1? The reason I ask is that I am aware that later on down the line if you are looking to make certain claims Social Welfare will refer you to a department by the name of scope for assessment. What SCOP will do is assess weather it was correct for you to be class A1 and in this circumstance you would fail on the basis that although you might have only 15% of the shareholding of the company you would be the managing director controlling the company and in their opinion should be class S1.

In short the 15% rule is something that the Revenue use but it is not what Social Welfare use.
 
jack2009 said:
As you say you have to reduce your shareholding to less than 15%, so do that and show them evidence of same.

However, why do you want to be on class A1? The reason I ask is that I am aware that later on down the line if you are looking to make certain claims Social Welfare will refer you to a department by the name of scope for assessment. What SCOP will do is assess weather it was correct for you to be class A1 and in this circumstance you would fail on the basis that although you might have only 15% of the shareholding of the company you would be the managing director controlling the company and in their opinion should be class S1.

In short the 15% rule is something that the Revenue use but it is not what Social Welfare use.
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Thanks for the reply.

I suppose I want to have the safety net there, that if the business does not succeed - and that if I have to sign on at the dole office, I would at least be entitled to unemployment benefit from DSW.

There is no guarantee that my company will succeed, so I want to cover my bases.
 
Chas Dickens said:
... in to contract work - I formed a limited company.

My company shareholders are myself and my wife (50/50 split) ...
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I think its a shame that you seem to have gone ahead apparently without seeking professional advice regarding the tax and other implications for both your wife and yourself.

As matters stand you both lose your PAYE tax credits (hence the halving of your tax credits) and as proprietary directors will be assessed for class S1 PRSI rates and consequent entitlements in the event of a claim.

Is there some special reason you could not have operated under sole trader status and saved some of the hassle?
 
Sorry, but I dont think that you will actually be able to cover yourself by paying PRSI class A.

Perhaps you should double check this now with Social Welfare and possibly consider taking out some sort of Payment protection cover.
 
mathepac said:
I think its a shame that you seem to have gone ahead apparently without seeking professional advice regarding the tax and other implications for both your wife and yourself.

As matters stand you both lose your PAYE tax credits (hence the halving of your tax credits) and as proprietary directors will be assessed for class S1 PRSI rates and consequent entitlements in the event of a claim.

Is there some special reason you could not have operated under sole trader status and saved some of the hassle?
Click to expand...

The only tax credit that has been cut is mine.
My tax credit was halved.

My wifes tax credit remains the same as before.
My wife is employed by another company.

I wasn't aware that 15% threshold applied in terms of my PRSI status.
 
jack2009 said:
Sorry, but I dont think that you will actually be able to cover yourself by paying PRSI class A.

Perhaps you should double check this now with Social Welfare and possibly consider taking out some sort of Payment protection cover.
Click to expand...

I have spoken to the Revenue and they inform me that as soon as I registered my company for tax, my PRSI and my tax credit changed.
Where previously I was an ordinary taxpayer with a tax credit €3.5k pa and paying PRSI Class A1, today I have a tax credit €1.7k and am supposed to be paying PRSI class S1.

The only way to restore my original paye/prsi designation is for me to bring my shareholding to below 15%.
This is the only solution to this matter.
 
Please Chas,

Trust me you need to go meet with Social Welfare to confirm this now. Dont leave it until the day that you are fearing ie your company fails only to find out that you are not covered as SCOPE determine that you were a proprioritor director.

I have liquidated many companies were the directors did what you are doing only to realise that it was all in vein!
 
As I said -
mathepac said:
I think its a shame that you seem to have gone ahead apparently without seeking professional advice ...
Click to expand...
The Revenue are not your tax advisors and as already pointed out Social Welfare have a different set of criteria for benefits assessment.

The implications for you and your wife (as either a proprietory director of a limited company or as the spouse of one) are potentially wide-ranging and long-term.

I think you need professional advice.
 
Also, ensure you get opinions from social welfare and revenue in writing as you will find their opinions on issues change!!!
 
mathepac said:
As I said -
The Revenue are not your tax advisors and as already pointed out Social Welfare have a different set of criteria for benefits assessment.

The implications for you and your wife (as either a proprietory director of a limited company or as the spouse of one) are potentially wide-ranging and long-term.

I think you need professional advice.
Click to expand...

I am well aware that the Revenue are not my tax advisors.
However it is the Revenue which altered my details on receipt of the TR2 form for my company.

I have received professional advice also on this topic this afternoon.

My advisor contacted the Revenue today and was told that the only way to revert back to PRSI A1 class is to reduce my shareholding to less than 15%.

I have instructed my advisor to clarify this issue with the DSW,
 
It was more a request to hear you say "thank you"! You appear to be very reluctant to accept the answers we have provided at your request!
 
jack2009 said:
It was more a request to hear you say "thank you"! You appear to be very reluctant to accept the answers we have provided at your request!
Click to expand...

I've expressed my thanks in two separate posts on this thread - if you care to read the replies.
 
mathepac said:
I think its a shame that you seem to have gone ahead apparently without seeking professional advice regarding the tax and other implications for both your wife and yourself.
Click to expand...

Chas Dickens said:
My wifes tax credit remains the same as before.
My wife is employed by another company.
Click to expand...

Your wife's tax credits will be reduced also, she should inform the revenue of the situation now rather than getting a suprise later on.
 
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