Old aged pension for self employed 54 year old

From what you've written it seems evident that there has been some uncertainty about your father's employment status over the years.
Initially, you referred to him as "self-employed", but have gone on to say that he was "working for the family business" and you later mention that he was "employed there". All of these things have different meanings when it comes to PRSI Classes, so you/he need to establish his exact employment situation for each of the years. It's fair to assume that from his perspective he wouldn't have been aware of the significance of that which is why his professional adviser must be asked to clarify the situation, year by year.

So instead of asking who else can help, you first need to tackle the source of the information that was filed with the Revenue Commissioners and Social Welfare over the past 34 years - and that's the accountant. I appreciate that this may require a difficult conversation - or a solicitor's letter! - but it must be done. Because until that has been clarified, you're not even at the start line so cannot take any steps towards addressing the situation.
 
Apologies. Initially he was employed by his father, who subsequently became ill and then he took over the running of the business and so is now deemed self employed. As I stated at no stage did he work other than for the family business. The family accountant has been asked to provide the rationale for the PRSI payments. He has obtained advice today from a friend ( another accountant ) and he has told him to make an appointment to discuss the issue at his local social welfare office to back remedy the contributions, ie request to change them to A on the basis that the family accountant was incorrect. This will mean back calculating the payments for 18 years (1987-2005, excluding 2003, which was paid as A). His friend indicates that the rate paid should have been A. Depending on his income this could be costly but the figure won’t be clear until the income is examined.
 
If a family member is employed as an employee by a 'prescribed relative' and the family employment relates to a private dwelling house or a farm in or on which both they and the employer reside then that family member has a nil liabllity for PRSI.

A 'Prescribed relative' is a parent, grandparent, stepparent, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother, or half-sister.

PRSI Class M is used to record situations in which there is a nil contribution liability.

The 54 year old business man was probably returned as a person who worked on duties relating to the home or farm. This would account for the Class M contributions.
 
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Agree entirely. That will be the focus of his claim. Much like a publican living over a bar his business was not conducted in the home.
 
Susie2017 said:
Depending on his income this could be costly but the figure won’t be clear until the income is examined.
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You do realise that there will be an income tax liability too if there is a PRSI one?

Look, a full state pension is very valuable, and I'm just a stranger on the internet.

But what it looks like here is two decades of misreporting of this man's income to the Revenue on a big scale.

Look into this carefully and take your time. There is no rush. Talk to DSP in the abstract about how they deal with misrecorded PRSI records and what evidence is needed to rectify. Act only when you think that the benefit of getting back contributions rectified is worth the risk of Revenue getting involved, including the risk to the assets of the business.
 
I am assuming that income tax was paid at the correct rate during this period. It would be at the lower rate as his father was in charge of the business. But that remains to be clarified by his accountant.
 
Susie2017 said:
Apologies. Initially he was employed by his father, who subsequently became ill and then he took over the running of the business and so is now deemed self employed. As I stated at no stage did he work other than for the family business. The family accountant has been asked to provide the rationale for the PRSI payments. He has obtained advice today from a friend ( another accountant ) and he has told him to make an appointment to discuss the issue at his local social welfare office to back remedy the contributions, ie request to change them to A on the basis that the family accountant was incorrect. This will mean back calculating the payments for 18 years (1987-2005, excluding 2003, which was paid as A). His friend indicates that the rate paid should have been A. Depending on his income this could be costly but the figure won’t be clear until the income is examined.
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Assuming that the PRSI Classes listed in your opening post are in chronological order then it appears that he has been returned at Class S for the past 15 years - which is good!

As regards the earlier years, if he decides that he wants to be re-classified as a Class A PRSI payer, then some issues may arise for the business:-

Were P35 Forms (annual return for employees) ever filed with the Collector General? If not, they may need to be (up to when he started to pay Class S PRSI) and there are penalties for late filing of this form.

Also, given that the business didn't treat him as a Class A employee, then it would be liable to pay the employer's Class A PRSI contribution for each year involved. So the annual accounts might need to be revised.

Some things to think about before kicking that sleeping dog - perhaps it would be wiser to leave it lying peacefully in its basket!
 
Thank you. I will try to establish about the p35 forms. I assume they were, but I don't know. He was an employee of the business and received a wage, but does not recall getting payslips. An accountant did all the books. I think some of the posters might think it was a cash business and that no taxes were declared. The father was regimental about the visit to the accountant and supplied him with all the business related income and expenditure including wages. There were no other employees in this business only himself and his Dad. His Dad was also a farmer and had two other sons who helped with the farm and continue to farm after the fathers passing. Thats about all I know. Hopefully more detail will follow.
 
Susie2017 said:
His mother is 86 and despite the fact that her now ddeceased husband ran a successful business as well as a farm she never received an old aged pension. The 54 year old is paying her the amount of the old aged pension for her keep.
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Susie2017 said:
In relation to his mother she does not own the farm. She got no old age pension.
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Not related to the original PRSI question, but this doesn't really make sense. If the mother has no beneficial interest in either the farm or the business, which appear to have been split among 3 sons, then she should be eligible for non contributory pension (unless she has other assets).
Are you sure she's not a 'partner' in one of the enterprises for tax purposes? At the very least, the person giving her money should have structured it as a deed of covenant for tax relief.

Is this the same accountant that was involved in your previous thread about pensions?
 
Yes it is the same accountant. As I said she is still receiving a wage from her son of about 12k a year to my knowledge (she didn't qualify for the OAP). However since the death of her husband around 6 years back she is getting a widows pension. Whether she was previously paid a wage from her husbands business while he was alive I am unsure. I am also not sure if she was deemed a partner in the business when her husband was alive. I just thought it was odd that she got no OAP, when I was aware other farmers wives had managed to qualify. I thought it was strange that a family accountant would not have made sure she would get that given that he was being paid a fair amount annually to deal with the tax affairs of the business. Her husbands final illness was over a period of 15 years so there was ample time to plan. Is there an amount limit on a deed of covenant ?
 
Susie2017 said:
I just thought it was odd that she got no OAP,
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The widows pension probably works out more in her circumstances. It's either or, you can't get both.

Susie2017 said:
I thought it was strange that a family accountant would not have made sure she would get that
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Not that unusual. PRSI for self employed only cane in during the late 80's. My parents were farmers, and I know my mam insisted on paying PRSI for herself, but the accountant was advising against it. It's paid off for her now, but it'd be very mixed among the farming population of that age.

Susie2017 said:
Yes it is the same accountant.
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As I said in the other thread, get a new accountant.
 
Ok, just to update. The accountant has replied in writing but regretfully has not set out his rationale for EACH year of the PRSI contributions (which was requested by my friend) as I outlined in the opening post. Instead he states; ’under the social welfare act, your employment with your father up to 2005 was deemed to be an excepted employment under paragraph 3, Part 2 Accepted Employment First Schedule of SW Consolidated Act 2005. Consequently you were not deemed to be insurance under the Act‘. He has looked at the Act and it relates to ‘employment in the common home’ etc. However his employment related activities were NOT carried out in the home. Instead there were two separate workshops on the farm where he did preparatory work for the business. The rest of the work was entirely offsite, involving driving and time spent on other public premises, including clients homes and in their business premises on the town main street. The accountant states ‘in 2005 it was decided following discussion with your father that the best arrangement was to enter into a partnership so as to allow you make full class S contributions’. As I outlined above his PRSI classes are all over the place including one year of A contributions in a year prior to 2005, which perhaps could have been applied in other years? . The nature of the employment never changed. It looks like the accountant has not classified him correctly during the years from 1987-2004. He is also using the 2005 Act to cover the years before that - is that correct, whilst stating incorrectly that his work was in the home, which it was not. He also states that he will get 73% of the OAP based on a current eligible retirement date of 2033. By the calculations done earlier here that would appear to be an overestimate. He plans to write back to outline these concerns. Any thoughts ?
 
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It sounds as if the accountant and the father discussed and agreed different scenarios over the years about the son, the employee, to best avail of the tax situation at the time. The son and you are stuck in a rut of blaming the accountant for all the issues but the reality was he probably gave the father different options and the father made choices on which option lead him to pay the least tax. Revenue did not seem to have any issues so the choices were probably the norm and within the guidelines for the time.

As several posters have pointed out if the son wishes to go back and change his class then the business accounts may need to be revisited for each of those years and the tax due recalculated. If the 53 yr old wants to do that then get a new accountant and all the tax records that are still available. He will probably pay revenue a lot of money for the exercise and pay his new accountant. But that is a choice he is free to make. He is probably better off using his money to make a pension plan for himself to ensure his own retirement. But that is another choice he can make.

With only knowing what you have posted here and without all the details I still think you and the son need to stop obsessing over the accountant and move to planning for the future. Put the past behind and move on.
 
Easy to say. That let's the accountant off the hook. The father would not have been an educated man. He relied on the accountant for correct decision making. There was more than sufficient income to pay prsi. Their business was profitable. Other posters have pointed out that the prsi paid was a 'dog's dinner'. There is money within the business to back pay corrected prsi. It makes no sense when the individual was in the same job, over the age of 16 and on more than 38 euro a week to pay J and M. Why do you say more income tax would be due when income tax was paid already ?
 
@Clamball
Brilliant summary.

@Susie2017
Theres really not enough facts for anyone to advise.

We were told the son has been running the business for 20 years, yet it was the father discussing with the accountant in 2005? Why hadn't the son taken over the relationship?
When you now say there's enough money 'in the business' does that mean there's a limited company set up, rather than a sole trader? That would completely change things.

It's plausible that Class J might have been a valid option with family employment, depending on the circumstances.

The usual instruction to accountants, particularly in the earlier years we're talking about here, was to minimise tax / PRSI. The benefits for each class have changed over the period you're talking about here, so it might look like bad choices we're made looking back, but that doesn't mean they were wrong at the time.

If you want it examined, take all the factual information to another accountant, and pay them to review it. You'll need to be clear on whether they were an employee or not, if there was a company, exactly how much income they had each year, which class they paid for each year etc etc. None of this is clear to me reading the thread.
 
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He was employed by his father til 2005. Then self employed. Then started LTD co to manage the business in 2013. Why is accountant referring to 2005 Act, when the period in question is prior ?
 
Susie2017 said:
Why is accountant referring to 2005 Act, when the period in question is prior ?
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The 2005 Act was primarily a tidy up (a 'Consolidation' believe it or not!) of all the pre-existing legislation. You could go back to all the legislation in effect at the time, and you'll find the same thing.

I'm assuming prior to 2005 the 'business' and the farm were all run as a single enterprise by the father?
 
Susie2017 said:
That let's the accountant off the hook. The father would not have been an educated man. He relied on the accountant for correct decision making.
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If he wasn't sure he could always have sought separate professional advice.


Others have given good advice on this thread. This looks very like a tax minimisation strategy by the man's father in the past that hasn't worked out too well for the friend.


So I think your friend should look forward and not back. There might be ways for him to maximise a private pension going forward so head over to the money makeover forum. That would be a better use for his wealth than going down this rabbit hole.
 
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