Tax Question: Employee and sole trader at same time?

I work in the IT sector, have been in full time employment for a number of years and am quite happy to stay in this situation for job security, etc.
However as with a lot of people in the sector you always end up fixing PC's for friends/family etc.

By doing this for a good while I've built up a good client base of friends, family and others through word of mouth. Now a lot of people will give you a few quid, even if you dont expect it, for your time and effort and it does add up over time.

However I've now been approached by a few of these people who are self employed to start providing them with IT advice and services on a regular basis and they have asked if I could provide them with VAT receipts for these services. I've advised them that it will only be evening and weekend work that I can do and they are very happy with this as I charge only a fraction of what a normally IT support company would charge.

My question is:

Can I do this and not be taxed to the hilt for doing it?

I currently use my TFA for my current job, so what are my options?

I.C

Your additional earnings will be taxed at your marginal rate. If you are single and earn over 32K, your marginal rate will more than likely be 42%.

Say you bring in fees of 5K during the year and have business expenses of 1K. Your profit of 4K is taxed at 42% and liable to PRSI at 5%.

Assuming you are not generating sales in excess of 25.5K, you do not have to register for VAT, so will not be charging VAT - so no need to raise an actual VAT invoice.

Your additional earnings will be taxed at your marginal rate. If you are single and earn over 32K, your marginal rate will more than likely be 42%.

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Yeah thats what I figured alright, Im earning over 32k at the moment and was just hoping I could reduce this a little but I guess not!!

Say you bring in fees of 5K during the year and have business expenses of 1K. Your profit of 4K is taxed at 42% and liable to PRSI at 5%.

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Would I be better off setting up a limited company as if I'm doing this I plan on getting insurance, claiming VAT back from parts and equipment purchased and maybe even claiming some expenses back from my home such as ESB, heating etc as the business will be run from home.

Assuming you are not generating sales in excess of 25.5K, you do not have to register for VAT, so will not be charging VAT - so no need to raise an actual VAT invoice.

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Well I've already informed those who I will be doing the work for that I will be charging a little more as I will be taxed etc on it and they have agreed for it as its still a lot less than they would be charged elsewhere, so if everything goes through the books, then I will be earning more than the €25k required to register for VAT.


Suppose I'm just trying to make hay while the sun shines as they say, but dont fancy having the tax man knocking on my door when the sun stops shining.

Maybe you could set aside a room in your house as a home office and charge some of your phone, lighting and heat to the business.

He will be paying PRSI as part of his normal employment so are you sure he has to pay it again for this extra work if he registers as a sole trader?

Maybe you could set aside a room in your house as a home office and charge some of your phone, lighting and heat to the business

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Woods, I will be doing that alright.. I'm setting up one room as a dedicated office/workshop. I've been making enquiries about my home insurance and what it covers, so will have to change this as technically my home will also be my workplace aswell, but like I said I want to do this properly and all above board.

What's the norm with the percentage of utilities for the house that you can claim back as business expenses?

He will be paying PRSI as part of his normal employment so are you sure he has to pay it again for this extra work if he registers as a sole trader?

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I never considered this to be honest. Guess I have a lot more home work to do and will be consulting with an accountant sometime in the near future.

I.C

Irishchappie said:

I'm setting up one room as a dedicated office/workshop.

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Be careful in doing this that you don't disqualify yourself from the 100% exemption that you otherwise would enjoy in relation to CGT on the future disposal of your home.

Irishchappie said:

... so if everything goes through the books, ....

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For your own sake, don't even consider any sort of tax evasion as a business strategy. You simply stand to lose too much if/when detected by Revenue. The routine imposition of 12% interest per year, and swingeing penalties, on arrears settlements mean that even modest evasion now could produce disastrous financial and/or business consequences for you later on.

Be careful in doing this that you don't disqualify yourself from the 100% exemption that you otherwise would enjoy in relation to CGT on the future disposal of your home.

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Would this be the case if I only was based in the house for a short period of time? As in, if the business grows and I decide to move into it full time, would it still affect my CGT if I moved to an external premises after say 2 years?

For your own sake, don't even consider any sort of tax evasion as a business strategy. You simply stand to lose too much if/when detected by Revenue. The routine imposition of 12% interest per year, and swingeing penalties, on arrears settlements mean that even modest evasion now could produce disastrous financial and/or business consequences for you later on.

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Ah I totally agree. Hence the reason why I want to do it all right from day one. I know too many people who tried doing things on the cheap and it backfired on them bigtime.

I.C

I am a permanent IT employee at the moment. I am looking into going contracting in the near future. I have the option of a weeks contract in another company at a very good daily rate. I have enough hols left to be able to take a weeks holidays to do this contract. Can I do it without my employer finding out??

pinkie123 said:

I am a permanent IT employee at the moment. I am looking into going contracting in the near future. I have the option of a weeks contract in another company at a very good daily rate. I have enough hols left to be able to take a weeks holidays to do this contract. Can I do it without my employer finding out??

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Pinkie,

A lot of employers put clauses in their contracts with employees about things like this especially if its for a company thats direct competition to them. I'm not sure they would let you do it. But it might be worth sussing out from them if they would let you.

Some honestly dont mind, if you let them know, I know a previous employer I had didnt mind me doing some work on the side on the stipulation that it didnt affect my primary job with them. However this wasnt IT related and I was only using it as a means to pay off some debts and I only worked at it for about a year.

On top of that would it be worth doing as your tax free allowance is being used up by your main job, so that means every penny you earn with this contract will be taxed at the high rate..

Tox