Self-employed/Contractor

eth0_

Can anyone help me out here, what is the story with contracting and being self-employed, I know i'll need to register a company which is 60 euro but don't know anything beyond that, is it very complicated, do I *have* to employ an accountant etc?

seamus

Originally posted by eth0_
do I *have* to employ an accountant etc?

Nope. And I would certainly not even consider hiring one unless your accounts are unmanageable.
You'd pay upwards of €1,500 per year, just for someone to add all your receipts together and tell you how much tax you need to be paying.

dahamsta

You don't need to register a company either, unless the people you'll be contracting to require it. Ditto VAT.

adam

Banjo013

Take it from an accountant .... (er - that'd be me ... !)

You're better off buying an "off the shelf company". All the administrative requirements will be settled in one foul swoop then.

You're better off registering for VAT too, cause then you can reclaim VAT paid by you on business equipment and expenses you incur. Also not being VAT registered may limit who you will get hired by.

And as long as you can add a few sums yourself and keep control over your own cash flow, you don't really need to hire an accountant. Consider equipping yourself with some accounting package though, like SAGE of TasBooks or one of them.

Best of luck !

eth0_

Originally posted by Banjo013
Take it from an accountant .... (er - that'd be me ... !)

You're better off buying an "off the shelf company". All the administrative requirements will be settled in one foul swoop then.

How do you do that? I have zero clue about this sort of stuff :-/
Anyone know any faq/how-to websites for this?

Banjo013

Originally posted by eth0_
How do you do that? I have zero clue about this sort of stuff :-/
Anyone know any faq/how-to websites for this?

Mmm .... maybe you should hire an accountant afterall ........ only messin' !

An "off the shelf company" is one where the company has already been formed and registered. It saves you the hastle of going through a whole truck load of paperwork to do it yourself. Alot of contractors take this route, because it allows them to operate with the minimum of fuss ... they are very simple and basic companies, however they are effective.

You might remember there was a fuss a little while back because it was revealed that the contract to operate LUAS in Dublin was awarded to a company that turned out to be an off the shelf company. The reason for the fuss was just that .... OTS companies are very simple, most often used by one person on their own. The public would have thought that something as vast as operating LUAS was more complex than that.

I've never actually gone through the process of forming one myself. Try www.cro.ie. - the Companies Registration Office. You should be able to learn alot about it somewhere in there.

Also it might be worth Googling "off the shelf company".

safetyman

You need to consider what business you are in and if you need protection that a limited company can give you.

Think carefully about the question of insurances. How risky is the business you are in?

A lot of companies will want to know you are insured against risks.

RainyDay

Hi Banjo013 - I think your information is out of date, though I'm not an expert in this area myself. I understand that off-the-shelf companies can no longer be used, except in very rare circumstances, since regulations changed a few years back.

However, my real concern is your recommendation to register a company. The current regulations for company reporting are quite onerous. The CRO are fining company directors every day for failing to comply with reporting requirements. I wouldn't recommend that anyone sets up a company unless you are confident that you will have a good, steady stream of income and a good reason to limit your liability.

Check out Tommy McGibney's Guide to starting a new business for more details.

Johnmb

Originally posted by eth0_
How do you do that? I have zero clue about this sort of stuff :-/
Anyone know any faq/how-to websites for this?

TBH, if you can take a day off, you would be better off setting up your own company. It is not that hard, and it is a lot cheaper than buying one off the shelf. I too am an accountant, and have set up many companies for clients, friends, and myself. It is just a matter of filling out a few forms. However, if your potential clients don't require that you be a company, then just go with being a sole trader, and maybe registering a business name. check out the CRO website (www.cro.ie), the relevant form for a company is the A1 form (it costs €61, assuming low share capital). Standard memorandum and articles can be bought in a statutory stationary shop, one of which can be found on Bolton Street (they cost about €5). If you have any questions about filling out the forms etc you can PM me, it's not worth paying a couple of hundred Euros to get someone else to do it for you.

eth0_

Cheers johnmb! Basically it's a full time 40hour week job but you're employed as a contractor, they do require that you're a ltd company as apparently the employer/agency can be held responsibly if you don't pay your taxes?
The agency can put us in touch with an umbrella company but tbh i'd rather do it myself if it's not a huge amount of hassle

Johnmb

Originally posted by eth0_
Cheers johnmb! Basically it's a full time 40hour week job but you're employed as a contractor, they do require that you're a ltd company as apparently the employer/agency can be held responsibly if you don't pay your taxes?
The agency can put us in touch with an umbrella company but tbh i'd rather do it myself if it's not a huge amount of hassle

It's no hasle. You just need to fill out the form A1, and fill in the blanks on the standard memo and articles. Once you do that, you need to get them signed by a Peace Commissioner, then just bring them in to the Companies Registration Office. When you select a name, do a search on the CRO website to make sure the name hasn't already been taken. Once you get your company details back from the CRO, you just need to register it for tax, but that is no more complicated than registering yourself for tax as a sole trader. Again, when you actually have the forms in front of you, PM me, as any questions you have about it will be much easier to answer when you can see exactly what you are dealing with. The only other thing you will need is someone to be a Director (you can be the sole owner, but you still need two directors). They don't have to do anything other than sign the form A1, and the annual returns. Usually a husband/parent/sibling will do that for you (make sure it is someone who you are sure will still be around in 6 months time (and every 12 months thereafter), as you will need them to sign off on your Annual Return, and also make sure it is not someone you are likely to fall out with and never speak to again (hence, people rarely get there friends to do it, it is a pain removing a director who won't sign the forms).

RainyDay

Several contributors are underestimating the effort & potential impact involved in registering and maintaining a limited company. It's not just a question of 'signing a few forms'. At a minimum, it's a question of ensuring that the complete, legal annual returns are submitting in time every year. Failure to do so will result in director fines and /or company strike-off (with extra fees required for reinstatement).

Anyone who would agree to be a 'nominee director' (i.e. just sign the form each year) without seeing the accounts and understanding the business is a fool. By taking on a directorship, you take on significant duties and liabilities. If your fellow director is screwing around (or even is just bad at running a business), you could find yourself facing fines and/or being barred as a director.

Don't register a company unless you are confident that you really need to do so & and you are confident that you will keep up with the paperwork every year.

Johnmb

Originally posted by RainyDay
Several contributors are underestimating the effort & potential impact involved in registering and maintaining a limited company. It's not just a question of 'signing a few forms'. At a minimum, it's a question of ensuring that the complete, legal annual returns are submitting in time every year. Failure to do so will result in director fines and /or company strike-off (with extra fees required for reinstatement).

Anyone who would agree to be a 'nominee director' (i.e. just sign the form each year) without seeing the accounts and understanding the business is a fool. By taking on a directorship, you take on significant duties and liabilities. If your fellow director is screwing around (or even is just bad at running a business), you could find yourself facing fines and/or being barred as a director.

Don't register a company unless you are confident that you really need to do so & and you are confident that you will keep up with the paperwork every year.

When dealing with a one man operation, as this will be, there is nothing complicated about it. I have dealt with contractors for most of my accounting career, they operate very simply. The standard is one invoice a month for income, and some expences (including often one third of the home bills if that is their office). The accounts are so simple that a spreadsheet will do them (no fixed assets, or maybe a portable computer at most). Once the accounts are maintained, there is no reason why the annual return cannot be made on time, and there is no chance of you forgetting because they send you several reminders throughout the year. The only people who like to make out that there is something major about a contractor setting up a company are us accountants who like to justify our fees. As long as eth0, or anyone else, only uses the company as a middleman for receiving payment, then there is nothing complicated about it. If stocks, fixed assets, creditors and debtors start becoming involved, then that is a different matter, but this doesn't sound like one of those jobs, it is a basic contractor setting up a sole proprietor company.

The Corinthian

I’ve gone through the incorporation paperwork myself and it’s a bit of a pain in the ass, tbh. You will also need a solicitor to sign the documents. Companies limited by shares (an LTD) also require a minimum of two directors, by law - so you may want to get talking to a relative or friend. You will also want to organize a registered office address - you probably won’t be allowed to do so in rented accommodation.

With regard to VAT; you must be registered for VAT if you expect that you will be invoicing/earning over a certain amount per annum (about €25k, I think). What’s important is that you charge/pay VAT on a cash basis as this means that you’re liable to pay VAT only on what is paid to you, not what you invoice. VAT is a double-edged sword though. Sure all your purchases will be cheaper, but your rates be dearer to those who cannot claim back VAT.

Keep all your receipts - many of those may be claimed as company expenses from now on. Where possible, pay yourself as expenses or directors drawings, otherwise you’ll get hit for PAYE and employers PRSI. Do look into professional indemnity insurance also, if you’re not going through a recruitment firm. Go direct to a UK insurance firm; don’t bother with the Irish brokers.

Both Johnmb and RainyDay are correct. Most of the paperwork and accounts are not a major hassle. However, if you don’t keep tabs on them from day one and start missing deadlines the CRO, VAT office or Revenue Commissioners will introduce you to a World of Pain. Additionally, there are numerous responsibilities attached to being a director of a company - even a nominal director. Inform yourself.

When in doubt call the CRO, VAT office or Revenue Commissioners. They’re actually very approachable and helpful, most of the time.

HTH

Johnmb

Originally posted by The Corinthian
I’ve gone through the incorporation paperwork myself and it’s a bit of a pain in the ass, tbh. You will also need a solicitor to sign the documents.
You do not need a solicitor to sign anything, although you can get one who is a commissioner for oaths to sign it if you want. It is easier, and a lot cheaper, to go to a Peace Commissioner though.

Companies limited by shares (an LTD) also require a minimum of two directors, by law - so you may want to get talking to a relative or friend. You will also want to organize a registered office address - you probably won’t be allowed to do so in rented accommodation.
You can use your own address for the registered office, or if you move a lot (or think you might in future), maybe your parents. Just make sure it is somewhere you can get post from, as the Companies Registration Office sends everything there.

With regard to VAT; you must be registered for VAT if you expect that you will be invoicing/earning over a certain amount per annum (about €25k, I think). What’s important is that you charge/pay VAT on a cash basis as this means that you’re liable to pay VAT only on what is paid to you, not what you invoice. VAT is a double-edged sword though. Sure all your purchases will be cheaper, but your rates be dearer to those who cannot claim back VAT.
I haven't dealt with this because it will be the same regardless as to whether or not a company is registered. In this case, if the company wants to contract another company, then they will be aware of the extra 21% for VAT. For a service, as I assume this will be, the figure is €25,500. If you are going to bill for more than that over a year, you need to register for VAT, regardless as to being a sole trader or a company.

Keep all your receipts - many of those may be claimed as company expenses from now on. Where possible, pay yourself as expenses or directors drawings, otherwise you’ll get hit for PAYE and employers PRSI.
No, employer's PRSI is not charged on a proprietory director's salary. It is best to register the company as an employer, and deal with your taxes on a PAYE basis, otherwise you'll have to start worrying about preliminary tax, and holding onto enough money to pay you taxes in one big go. Registering for PAYE as an employer is not a big deal, you just tick a box on the tax reg form that you will be filling out for VAT and Corporation tax. Just put all the expense you are allowed to through the company, and take the balance as a salary. That way, there will be no profit to pay corporation tax on. (Profits on such a company are also subject to other taxes in order to stop someone avoiding paying PAYE by leaving money in the company to only pay the lower corporation tax, so it is better to clear the profits).

Do look into professional indemnity insurance also, if you’re not going through a recruitment firm. Go direct to a UK insurance firm; don’t bother with the Irish brokers.
Again, that's something that will not change whether or not a company is registered. If you think you can be sued, get insured.

Both Johnmb and RainyDay are correct. Most of the paperwork and accounts are not a major hassle. However, if you don’t keep tabs on them from day one and start missing deadlines the CRO, VAT office or Revenue Commissioners will introduce you to a World of Pain. Additionally, there are numerous responsibilities attached to being a director of a company - even a nominal director. Inform yourself.
Again, the tax responsibilities will be no different as a sole trader. Keeping tabs on your accounts is something that has to be done either way. If you are not good at this, then you should consider not becoming a contractor, or else consider paying a qualified accountant to keep tabs on things for you.

When in doubt call the CRO, VAT office or Revenue Commissioners. They’re actually very approachable and helpful, most of the time.
Yep. They can also be contacted over the internet via their websites. The main thing is not to feel overwhelmed. Running a company is no more difficult than running a sole trader business. As long as things aren't getting complicated (selling shares, changing directors, names, registered offices, etc.) then it will only require one extra document per year (Annual return), and it is much handier for paying your personal taxes as you can go the PAYE route rather than the income tax route.

The Corinthian

Originally posted by Johnmb
You do not need a solicitor to sign anything, although you can get one who is a commissioner for oaths to sign it if you want. It is easier, and a lot cheaper, to go to a Peace Commissioner though.

I don’t have the relevant form in front of me, so I only suggested whom we used. Ironically, the solicitor in question was a friend, so it was cheaper still.

You can use your own address for the registered office, or if you move a lot (or think you might in future), maybe your parents. Just make sure it is somewhere you can get post from, as the Companies Registration Office sends everything there.

Changing your registered office address can now be done easily enough, on-line.

No, employer's PRSI is not charged on a proprietory director's salary.

Really? I don’t do the payroll, so I’ll have to investigate that. I hope you’re right. Really

Johnmb

Originally posted by The Corinthian
I don’t have the relevant form in front of me, so I only suggested whom we used. Ironically, the solicitor in question was a friend, so it was cheaper still.
I used the local Peace Commissioner for my company. That was free, it doesn't get any cheaper than that

Changing your registered office address can now be done easily enough, on-line.
Yeah, true. But if you can, it's best to stick with one, as that will insure you don't miss any important correspondence.

Really? I don’t do the payroll, so I’ll have to investigate that. I hope you’re right. Really
As a propriatary director (own 50% or more of companies share capital), you are regarded as class S for PRSI.

RainyDay

Originally posted by Johnmb
When dealing with a one man operation, as this will be, there is nothing complicated about it. I have dealt with contractors for most of my accounting career, they operate very simply. The standard is one invoice a month for income, and some expences (including often one third of the home bills if that is their office). The accounts are so simple that a spreadsheet will do them (no fixed assets, or maybe a portable computer at most).

What is very straightforward for you as an accountant is a fog of mystery & bureacracy for the average contractor. Sure - there are some well-disciplined accountants who are well capable of handling their own registration. But for many contractors, it is well beyond their capability/attention span.

If it was so easy for those contractors, why do you think they bothered getting you to do their returns for them?

Originally posted by Johnmb
Once the accounts are maintained, there is no reason why the annual return cannot be made on time, and there is no chance of you forgetting because they send you several reminders throughout the year.

Fine in theory, but not in practice. Did you ever meet those guys who just dump or 'file' (i.e. hide for months) any envelope which comes in with a harp on it? Or those guys who move addresses every six months, and only get back home to Mammy's address at Christmas. It's just not that easy.

Originally posted by Johnmb
The only people who like to make out that there is something major about a contractor setting up a company are us accountants who like to justify our fees.

Not true. I'm not an accountant & I have no vested interest in this. However, I have seen several contractors/tradespeople posting on Askaboutmoney.com with nightmare stories about companies which they registered some time ago resulting in fines & striking off. It does happen.

Johnmb

Originally posted by RainyDay
What is very straightforward for you as an accountant is a fog of mystery & bureacracy for the average contractor. Sure - there are some well-disciplined accountants who are well capable of handling their own registration. But for many contractors, it is well beyond their capability/attention span.
Then they are going to have major problems regardless. Even operating as a sole trader requires the same amount of work, except for the Annual return, which is just one form, which only requires you to think about the date (all other information comes from the memo & articles, and the attachments are the balance sheet which has to be done in any case, and a standard directors report which can be downloaded from the CRO website).

If it was so easy for those contractors, why do you think they bothered getting you to do their returns for them?
Mainly because at the time audits were still required, and also because they wanted us to do their tax for them in any case. The main problem eth0 is going to face is keeping her accounts up to date, and she is going to have that problem regardless as to whether she registers a company or operates as a sole trader, so it is an irrelevant problem to the subject of registering a company or not registering a company.

Fine in theory, but not in practice. Did you ever meet those guys who just dump or 'file' (i.e. hide for months) any envelope which comes in with a harp on it? Or those guys who move addresses every six months, and only get back home to Mammy's address at Christmas. It's just not that easy.
As I said above, those people are going to have problems no matter what. Tax issues are irrelevant to deciding whether or not to register a company as they will arise for sole traders too. The only thing relevant is the extra work involved with having a company, and for such a small, basic enterprise, that extra work will consist of returning one form extra per year to the CRO.


Not true. I'm not an accountant & I have no vested interest in this. However, I have seen several contractors/tradespeople posting on Askaboutmoney.com with nightmare stories about companies which they registered some time ago resulting in fines & striking off. It does happen.
It happens, but then some people also struggle to climb stairs, that doesn't mean that climbing stairs is anything for an average person to avoid. If people can't make one return per year to the CRO on time, then chances are they also are not making their tax returns on time either. That's down to their personality, they should simply hire an accountant to look after them. If you are the type of person who can make tax returns on time, then there is no reason to think you can't make CRO returns on time as well.

RainyDay

Hi John - Your comparisions to the requirement to do tax returns aren't relevant. One has no choice in the matter of tax returns. They have to be done. One does have a choice about registering a company and taking on the additional reporting requirements. I just want to be sure that Eth0 knows what they are getting into.

Hi Eth0 - Have a good read of this thread and this thread (hoping link to Google cache works) before you jump in. You might get some useful generic information from
Company Formations International website

May I ask why you have to register a company in this case?

halkar

There are very good advice on this thread about forming companies but if you can avoid don't bother. Its not like it used to be 5-10 years ago. And if you do form a company get an accountant to save yourself some hassle. I know charges can be high but it goes as expense so you save on taxes and if you register for VAT you get that back too so when you sum it all it doesn't sound much. Pay attention to CRO returns every year as they will fine you if you miss and they don't take any excuses. Rest is easy , go PAYE and get P35 filled every year, do your own VAT every 2 months as it is easy. But just for P35 and CRO returns I would advise to get and accountant as they can get complicated (it is for me ), you will need acoountant for audits which are required if you ever need anything from banks, they used to ask audits but i think these days they just give you a form to be filled by accountant. Unless you are thinking of keeping your company for some years to come avoid going for big expenses to save on taxes

Johnmb

Originally posted by RainyDay
Hi John - Your comparisions to the requirement to do tax returns aren't relevant. One has no choice in the matter of tax returns. They have to be done. One does have a choice about registering a company and taking on the additional reporting requirements. I just want to be sure that Eth0 knows what they are getting into.
That is what I have been saying. The only extra work eth0 will have to do is to make sure she returns the B1 on time each year. It is a simple form, nothing complicated about it (apart from maybe the date). Also, I reckon it is much easier to deal with your taxes as PAYE rather than as income tax. That is something a sole trader cannot do, but a propriatary director can.

vibe666

it depends very much on how good you are with your sums.

i hate doing tax returns and invoicing etc. and i'm very forgetful when it comes to all things related to facts and figures.

being that type of person I'm more than happy to pay someone a little bit of cash to sort everything out for me.

i use a management company called CXC Global who have offices in Cork. they have done a lot to give me confidence in their abilities and i'm more than happy to give them a few quid to make all my tax related headaches disappear.

some people i work with use another company called Chesterfield Management too who they also swear by.

it's just a case of signing a couple of forms (and it really is just that) and you're set up. you get your own limited company completetly controlled by CXC including using their bank accounts, VAT registration, Insurance and paying the minimum amount of tax possible with any deductions you can make done for you. send them all your receipts and they'll sort out what you can claim back too. all sorted, no fuss, and no headaches when it comes time to do your tax returns. all taken care of for you.

worth it if like me you hate doing all that form filling and adding up.

but that's just me.

RainyDay

OSK Chartered Accountants have a useful section on their website dealing with all issues of setting up as an IT contractor. It includes tax information and a sample set of accounts.

Emboss

Originally posted by RainyDay
Hi John - Your comparisions to the requirement to do tax returns aren't relevant. One has no choice in the matter of tax returns. They have to be done. One does have a choice about registering a company and taking on the additional reporting requirements. I just want to be sure that Eth0 knows what they are getting into.

Hi Eth0 - Have a good read of this thread and this thread (hoping link to Google cache works) before you jump in. You might get some useful generic information from
Company Formations International website

May I ask why you have to register a company in this case?

In my case...or soon to be my case

the company won't write a cheque to an individual ....only a company name