Retaining class A PRSI when self employed

Hi folks,

I have a cousin who is currently employed within a company of about ten which is about to go bust. It's a pretty niche area and she has very little chance of picking up another job anytime soon.

To complicate this, she was diagnosed with MS about two years ago. She's 33 now and is in good health most of the time but, as you all know, this is a progressive disease. She's also a single mother of one.

As you might imagine, in this scenario, retaining her class A PRSI status for illness and - importantly - long term illness benefits is critical.

She feels that with the contacts she's made over the last few years, she could pull her current client list to a new business if she sets it up.

The question is - can this be done so that she can retain her class A PRSI?

What we're looking at right now is that she would have <15% ownership of a new limited company and would not be a director. I and another relative have our own companies and we're happy to take the major share ownership and directors roles for her.

From [1] below we see that will cover her for her employees PAYE tax credit (which is much less important here) - but, as they say:

Employers PRSI is not charged on salaries paid to company directors whom are considered to have a “controlling interest” in the company. The difficulty with this is that as there are no statutory guidelines or judicial interpretation of what constitutes a “controlling interest” it is open to debate and must be judged on a case by case basis.

Click to expand...

So, the questions are:

• is there a legitimate way for her to keep her class A status (she knows this means larger PRSI costs as well as employers' PRSI);
• can she 'opt' to pay at class A rates?
• is there anything illegal about structuring a company as mentioned above to achieve this?

Any help, experience and / or advice would be greatly appreciated.


- John.


[1] Post on smallbusinessadviceireland.blogspot.ie entitled "Company Directors, the PAYE tax credit & Employers PRSI"

Well if you and your other relative set up a company and you two own all the shares and are the two directors then she is an employee of that company and owns no shares and is not a director then it's class A. When in fact she is a director and you are holding the shares in trust for her.

If she owns more than 15% of the shares then she does not get the PAYE Cr. So why not take 33% of the shares each and have 3 directors she does not control the company but gets a salary and you have your interest in shares in return for acting as directors and mentoring her.

6 of one and half a dozen of another.

Control would be more than 50% or a husband and wife 50% each.