Sole Trader Vs Ltd Company

bcfrug

Hi All,

Please can someone give me some advice on this.
I have a service contract signed and agreed with a company for the next 12 months. Turn over approx 90,000 Euro.
I will be offering my services only (Consultant) and i will not be selling any goods whatsoever.
I will be working on site at the clients facility so i will have minimal overheads etc. `

For tax reasons im thinking as a sole trader i may have to pay more tax than if im a ltd company.

Can someone clarify this for me and maybe give me some advice on it.

Regards

dbran

What sort of services?

ssbob

Can't give you advice mate but I would suggest going to see an accountant.

Depending on the service you are providing it seems to me that there may be an issue with Sole Trader v Employement but that is more for the company who have taken you on.

CompanyBureau

I would recommend that you discuss your situation with a tax advisor. You are close to limited company territory with that turnover though. If you can afford to contribute to a pension it'll be well worth doing should you decide to go ltd.

bcfrug

dbran wrote: »

What sort of services?

My labour basically.

dbran

Doing what exactly..........????

bcfrug

Production manager/Advisor.
Engineering backround.

dbran

Hi

It may be worth your while becoming a limited company particularly if it turns out that the income earned is more then you need to live on.

However this is provided that the work you do would not be considered a professional services under S441 which imposes a surcharge of an additional 7.5% on profits retained in the company which is not distributed to the shareholders. Hence the advantage of being a company would be marginal at best.

The work of an Engineer is considered a professional service and would be caught by this provision. However if you are just scheduling the work or a production manager etc then this might not be the case.

You need to seek the advise of an accountant as this may not a simple question.

Regards

dbran

barneystinson

The more info the OP gives the more it appears he is being offered an employment contract...

OP, it might interest you to read the following from Revenue.ie:

"Criteria used to determine if an individual is an employee

While all of the following factors may not apply, an individual would normally be an employee if they:

• Are under the control of another person who directs as to how, when and where the work is to be carried out
• Supply labour only
• Receive a fixed hourly/weekly/monthly wage
• Cannot sub-contract the work. If the work can be subcontracted and the subcontractor subsequently makes payments to an individual to carry out the work, the employer/employee relationship may simply be transferred on to the subcontractor/individual.
• Do not supply materials for the job
• Do not provide equipment other than the small tools of the trade. The provision of tools or equipment might not have a significant bearing on coming to a conclusion that employment status may be appropriate having regard to all the circumstances of a particular case.
• Are not exposed to personal financial risk in carrying out the work
• Do not assume any responsibility for investment and management in the business
• Do not have the opportunity to profit from sound management in the scheduling of engagements or in the performance of tasks arising from the engagements
• Work set hours or a given number of hours per week or month
• Work for one person or for one business
• Receive expense payments to cover subsistence and/or travel expenses
• Are entitled to extra pay or time off for overtime.

Criteria used to determine if an individual is self-employed

While all of the following factors may not apply to the job, an individual would normally be self-employed if they:

• Own their own business
• Are exposed to financial risk, by having to bear the cost of making good faulty or substandard work carried out under the contract
• Assume responsibility for investment and management in the enterprise
• Have the opportunity to profit from sound management in the scheduling and performance of engagements and tasks
• Have control over what is done, how it is done, when and where it is done and whether they do it personally
• Are free to hire other people, on their terms, to do the work which has been agreed to be undertaken
• Can provide the same services to more than one person or business at the same time
• Provide the materials for the job
• Provide equipment and machinery necessary for the job, other than the small tools of the trade or equipment which in an overall context would not be an indicator of a person in business on their own account
• Have a fixed place of business where materials equipment etc. can be stored
• Cost and agree a price for the job
• Provide their own insurance cover e.g. public liability cover,etc
• Control the hours of work in fulfilling the job obligations

If there is any doubt as to whether a person is employed or self-employed, the employer should contact Revenue.
The Code of Practice for determining the employment or self-employment status of individuals (PDF, 229KB) is available."

As for your original question, if you feel that you might fall foul of the above, then contracting through a Ltd company gets around the problem, but the previous posters have highlighted some of the issues around that. You need to talk to a good accountant.

daigo75

@barneystinson: Thank you so much, I was looking for a description like this for ages! I've offered so many times a "contractor" position where I'd basically be treated like an employee, it's absurd.