IT contrating in London - Irish company vs UK company?

IamtheWalrus

asherbassad wrote: »

Right lads,

I'm completely lost with all this umbrella this/offshore that yada yada.
I started a contract last August (moved back to Ireland from abroad). Basically I have a payroll company do my monthly income and that's it. But I'm startled at what I lose.
On a E400 a day rate, say 8000 a month, I probably take home about 4600. I'm losing nearly half.
Also last year my contract was from august to december...I was definitely in the country and in the contract for less than 180 days. Can I do something about that?
I haven't filed a tax return yet for last year but my payroll company (CXC) are at me to get it done through them. I'm just thinking that they will just do something basic and I won't get a dime back.

Any thoughts?

Start your own Ltd. Little extra work for more money.

Playboy

I can only talk to my experience of using a UK company. Using a limited company is much more tax efficient than using an umbrella. If you are outside of IR35 then you should be keeping approx 75% - 80% of your date rate.

Pay yourself a salary below the tax and NI threshold (approx £7.5k) so you and your company are not liable to pay either. You can then claim a generous amount of expenses such as travel, lunch, home broadband, home as a office, phone etc.

Register for the VAT flat rate scheme which should lower your VAT rate to 13% for the first year. Remember you pay VAT on your gross earnings (day rate + 20% VAT) but you still actually make a little due to the difference.

Corporation Tax at your rate should be 20% which is paid on your profit. You then have approx £43K tax free income which is calculated from a combination of £7.5k salary and any dividends you take from the company (expenses arent counted as income). After £43k you then pay 25% tax on any dividends you take. If you have a partner who doesnt work then you can make them a equal shareholder and they can also take £43k dividends tax free. This means you can keep a far higher portion of your rate as income as essentially you can take £86k from your company free from any personal income tax. Anything above the £86k you can leave in your company for a rainy day or invest it on behalf of your company.

The accountants I use are very good and are contractor specific so if you like I can introduce you.

rgmmg

Well said Playboy.

The following site is a great resource for anyone in the temp/contract world:

http://forums.contractoruk.com/

Anything you can think of has probably already been discussed there...

IamtheWalrus

Playboy wrote: »

I can only talk to my experience of using a UK company. Using a limited company is much more tax efficient than using an umbrella. If you are outside of IR35 then you should be keeping approx 75% - 80% of your date rate.

Pay yourself a salary below the tax and NI threshold (approx £7.5k) so you and your company are not liable to pay either. You can then claim a generous amount of expenses such as travel, lunch, home broadband, home as a office, phone etc.

Register for the VAT flat rate scheme which should lower your VAT rate to 13% for the first year. Remember you pay VAT on your gross earnings (day rate + 20% VAT) but you still actually make a little due to the difference.

Corporation Tax at your rate should be 20% which is paid on your profit. You then have approx £43K tax free income which is calculated from a combination of £7.5k salary and any dividends you take from the company (expenses arent counted as income). After £43k you then pay 25% tax on any dividends you take. If you have a partner who doesnt work then you can make them a equal shareholder and they can also take £43k dividends tax free. This means you can keep a far higher portion of your rate as income as essentially you can take £86k from your company free from any personal income tax. Anything above the £86k you can leave in your company for a rainy day or invest it on behalf of your company.

The accountants I use are very good and are contractor specific so if you like I can introduce you.

How are you finding the market in the UK playboy?

Playboy

IamtheWalrus wrote: »

How are you finding the market in the UK playboy?

Excellent but then I work in IT Procurement, Vendor Management, Outsourcing, Contract and Commercial Management.... So not technically IT roles but related. I generally have a couple of offers on the table before one role finishes but I'm lucky to have an excellent network and get most of my work through that rather than recruiters.

JungleMartin

(I've read through this thread and discussion has continued over quite a few years, so hopefully it's fine to bump it with relevant questions. Some forums can be quite grumpy about bumping 'old' threads!)

srsly78 wrote: »

Umbrella companies are merely parasites. You do not need their "professional services" to manage a 1 man company.

Here is my "compleat idiuts guide to IT contracting thru Irish LTD company".

To setup an Irish Limited Company will cost you e100 through a formations agent (use an agent, dont try to do it yourself, you wont save money or time). A quick google will find you a company formation agent, I won't link one here lest I be accused of pimping.

Once you have the company setup you will want to register for VAT (not worth contracting unless you gonna do > e35k anyway). Then register for ROS. Now, using www.ros.ie, register yourself (use your pps number) as an employee of your own company. Almost done... Oh, get that funky excel payroll spreadsheet, choose your salary (just what you need, leave as much profits in the company as possible). Get yourself a company bank account. I'm with BoI, and lets just say their online stuff overwhelms me (and I'm a c++ programmer lol). Dunno who has better online stuff.

Every month:
Do your payroll, go to ros and file a P30. They changed this to every 3 months for 2011 I think?

Every 2 months:
File a VAT things on ros. Note VAT doesn't apply to exports to UK for example.

End of tax year:
File a P35, shows total prsi+paye paid for all employees.

Advantages:
You should be able to avail of company profits tax-free for 3 years (sorry don't have link to hand).
Give yourself an executive pension just like Seany and the lads wahey \o/
Claim overnight subsistence allowance of e109 when in London.
Claim travel expenses.
Buy fsckloads of IT gear, and write off depreciation on it.

Disadvantages:
If you don't know where to start it can be daunting, but hey this poast just remedied that amirite?

NOTE: The 183 day rule applies. Once you are in UK for 6 months you gotta pay UK tax. HOWEVER.... You can put yourself on "secondment" for up to a 2 year contract!!! Then pay yourself what you need to live on in London, and leave rest of money in company back in Ireland.
this -> http://www.hmrc.gov.uk/manuals/eimanual/eim77010.htm, refer to example 5 regarding Irish IT employee living in London.

I spend 1/4 of my time in London working, but am about to move over fulltime in the near future it seems.

srsly78, is this info still current and is it relevant to a contractor living and working in Ireland, i.e. setting up your own Irish limited company?

My situation is different to what's been discussed so far as I've just moved the other way, i.e. from UK to Ireland. Dad was from Sligo but I was born and bred in Derby (Go on the Rams!) and lived and worked all my life in Britain until a few months ago when I resigned my permie job and came to Ireland for personal reasons (to join the girlfriend).

So after a couple of months off I'm job hunting again and open to both permanent and contract roles. Most that have come up so far have been permie but I've also been put forward for a contract role which sounds good. Never having contracted before (anywhere) it's mostly new to me, except for what I've read over the past couple of days about the different options, which I broadly understand to be...
a) employee of an agency's umbrella company [probably not right for me]
b) director of an agency's umbrella company [should give more take home than (a)]
c) my own limited company? [could be run by me or managed by an agency?]

I'm happy to pay a reasonable amount for a decent service if it gives me a bit less hassle and gives me some valuable time back, but I don't want to be chucking hundreds or thousands down the drain.

PS I'm a senior Linux, Solaris and VMware techie.

Fratton Fred

I found the benefits of being a contractor slightly less in Ireland than the UK, so I had a limited company in London, but used cxc/contracting plus in Ireland.

Found them pretty good, especially at year end when they do your tax return for you.

Playboy

JungleMartin wrote: »

(I've read through this thread and discussion has continued over quite a few years, so hopefully it's fine to bump it with relevant questions. Some forums can be quite grumpy about bumping 'old' threads!)



srsly78, is this info still current and is it relevant to a contractor living and working in Ireland, i.e. setting up your own Irish limited company?

My situation is different to what's been discussed so far as I've just moved the other way, i.e. from UK to Ireland. Dad was from Sligo but I was born and bred in Derby (Go on the Rams!) and lived and worked all my life in Britain until a few months ago when I resigned my permie job and came to Ireland for personal reasons (to join the girlfriend).

So after a couple of months off I'm job hunting again and open to both permanent and contract roles. Most that have come up so far have been permie but I've also been put forward for a contract role which sounds good. Never having contracted before (anywhere) it's mostly new to me, except for what I've read over the past couple of days about the different options, which I broadly understand to be...
a) employee of an agency's umbrella company [probably not right for me]
b) director of an agency's umbrella company [should give more take home than (a)]
c) my own limited company? [could be run by me or managed by an agency?]

I'm happy to pay a reasonable amount for a decent service if it gives me a bit less hassle and gives me some valuable time back, but I don't want to be chucking hundreds or thousands down the drain.

PS I'm a senior Linux, Solaris and VMware techie.

Nixon Williams are a great contractor accountant. They do everything for you so its really easy to start contracting. I would advise using your own limited company but Nixon Williams can set all of that up for you. Fee is approx £100 per month which is great value for the service they provide. I can talk you through anything you need if you have questions. Probably best to do it over the phone so pm if you like and we can set something up

JungleMartin

Playboy wrote: »

Nixon Williams are a great contractor accountant. They do everything for you so its really easy to start contracting. I would advise using your own limited company but Nixon Williams can set all of that up for you. Fee is approx £100 per month which is great value for the service they provide. I can talk you through anything you need if you have questions. Probably best to do it over the phone so pm if you like and we can set something up

Thanks for the offer Playboy, I do appreciate that. I think you've misunderstood a bit though, as I'm going to be contracting in Ireland (yes, despite the original thread title).

Apologies for the delay, I'm only revisiting this now as the client has finally figured out what they're doing and have come back and offered me the contract. So now I need to revisit whether to use an umbrella company, get my own set up, etc.

Considering the thread title, I think I'd better create a new one for my situation (unless I find an existing one with the answers I need) but if anyone can suggest the most appropriate sub-forum to post it in, that would be much appreciated.