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Limited Company IT Contractor - some help needed

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  • 07-02-2017 10:35pm
    #1
    Ally Dick
    Registered Users Posts: 12,708 ✭✭✭✭


    Hi. I set up a Limited Company for the purpose of IT contracting three months ago. I have always been PAYE up to now. I am now working as a contractor in an IT role for a bank. I have opened a business account (with another bank, so nobody knows my business). An agency will pay my wages into this account. I will also use this account to pay my VAT. My question is, should I be putting all business expenses through this account e.g. food paid for in work canteen, Luas card top up etc. Does it matter? I know I can write off certain expenses, and I don't intend taking the p1ss in this regard. Is putting those expenses through the company account the same as "writing them off" against income, or would that be done via the tax return? Sorry about the stupid questions. I just don't want to fall foul of the tax man by doing it wrong. I have an accountant I can ask I suppose. All help appreciated


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    #2
    thegolfer
    Registered Users Posts: 346 ✭✭thegolfer


    Ally Dick wrote: »
    Hi. I set up a Limited Company for the purpose of IT contracting three months ago. I have always been PAYE up to now. I am now working as a contractor in an IT role for a bank. I have opened a business account (with another bank, so nobody knows my business). An agency will pay my wages into this account. I will also use this account to pay my VAT. My question is, should I be putting all business expenses through this account e.g. food paid for in work canteen, Luas card top up etc. Does it matter? I know I can write off certain expenses, and I don't intend taking the p1ss in this regard. Is putting those expenses through the company account the same as "writing them off" against income, or would that be done via the tax return? Sorry about the stupid questions. I just don't want to fall foul of the tax man by doing it wrong. I have an accountant I can ask I suppose. All help appreciated

    Be very careful here.

    Firstly this is an intermediate type setup, the company is between you and the bank, and these type structures are used to save the banks money, ie sidestepping the requirement to fork out for employers prsi if it was a direct paye employment.

    Revenue contractors project has been targeting these type setups.

    If it's programming then revenue treat this as a professional service company, subject to the close company surcharge, an additional tax on profits remaining in the company.

    This forum is most definitely not a place to seek advice.

    Speak to a tax consultant or your accountant.


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    #3
    begbysback
    Closed Accounts Posts: 2,910 ✭✭✭begbysback


    The way I processed through revenue

    VAT is straightforward and easily calculated - as for services not much is claimed back unless its for company supplies - pay VAT every 3 months in revenue system.

    Tax - rough estimate calculated by accountant to pay into revenue system - again I would pay every 3 months - at year end I would supply accountant with all expense receipts and he would say whether I was owed money (overpaid) or needed to pay more (underpaid)

    Expenses were paid by cash/credit card - not from company account - any moneys due from revenue was paid by cheque - I guess the less transactions on company account then easier it is to audit for yourself - for me only the below transactions would occur

    Money lodged to account for services provided
    Money paid to revenue for VAT
    Money paid to revenue for Taxes
    Money withdrawn and lodged to personal account

    Im not sure what your situation is with an agency - you might need to check who is billing


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    #4
    Ally Dick
    Registered Users Posts: 12,708 ✭✭✭✭Ally Dick


    Thanks for that post Begsbysback. Do I have to pay the accountant from the company account, to allow it to be seen as a business expense?


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    #5
    begbysback
    Closed Accounts Posts: 2,910 ✭✭✭begbysback


    i dont believe its absolutely necessary to pay any expenses from the company account - could be wrong here, but at the end of the day revenue just want to get their due taxes


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    #6
    [Deleted User]
    Posts: 17,728 ✭✭✭✭ [Deleted User]


    Ally Dick wrote: »
    .............. My question is, should I be putting all business expenses through this account e.g. food paid for in work canteen.........

    Not a business expense if the work canteen is your normal place of work
    Ally Dick wrote: »
    ........ Luas card top up ...
    Not a business expense
    Ally Dick wrote: »
    .............Does it matter?
    Yes it matters, any money from your companyt account not taken as wages, VAT etc isn't taxed to it needs to be a legitimate business expense.
    Ally Dick wrote: »
    ..............I know I can write off certain expenses, and I don't intend taking the p1ss in this regard
    food paid for in work canteen and luas top ups are taking the p1ss in 99% of cases

    .
    Ally Dick wrote: »
    ....Is putting those expenses through the company account the same as "writing them off" against income

    yes, ish
    Ally Dick wrote: »
    ...
    , or would that be done via the tax return?

    Ltd cpmpany returns has to detail the expenses too
    Ally Dick wrote: »
    .........Sorry about the stupid questions. I just don't want to fall foul of the tax man by doing it wrong. I have an accountant I can ask I suppose. All help appreciated

    If you are sitting next to a staff lad and you are a contractor it's easy to figure out what's a legitimate business expense IMO.

    Staff lad pays for lunch out of his pocket in work canteen, so do you, it's not a business expense.

    Staff lad pays for travel costs to normal place of work out of his pocket, so do you, it's not a business expense.

    Staff lad gets sent to Galway for a day on business, his travel costs and subsistence is paid for by work, legitimate business expense. Similar if you have to go to Galway for a day's work, it's not your normal place of work so you claim legitimate business expenses.

    Conceptually simple :)
    begbysback wrote: »
    i dont believe its absolutely necessary to pay any expenses from the company account - could be wrong here, but at the end of the day revenue just want to get their due taxes

    Indeed, and legitimate vouched expenses are fine.
    Ally Dick wrote: »
    Thanks for that post Begsbysback. Do I have to pay the accountant from the company account, to allow it to be seen as a business expense?

    pay him by company cheque is the norm


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    #7
    Ally Dick
    Registered Users Posts: 12,708 ✭✭✭✭Ally Dick


    Thanks Augeo. Very comprehensive and clear. Final question.....what tax do I pay at the end of the year? Is it tax on the income lodged to company account or tax on the drawings/wages I pay myself monthly to my personal account? I am aware that I pay Prsi as well. Is that on the monthly drawings? I have a meeting lined up with my accountant to discuss further as I am only new to contracting


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    #8
    [Deleted User]
    Posts: 17,728 ✭✭✭✭ [Deleted User]


    I think most Ltd companies may the due PRSI, PAYE & USC quarterly and VAT every 4 months.

    So from a wages point of view the tax on your wages stays in company account until end of every quarter, well a couple of weeks into the next really.

    End of year would be last quarter PRSI, PAYE & USC, last 4 months VAT and perhaps preliminary corporation tax.
    Ally Dick wrote: »
    ............ Is it tax on the income lodged to company account or tax on the drawings/wages I pay myself monthly to my personal account? ...........

    It's on the wages, not the company income. Corporation tax would be on any profits, ie what's left between income and expenses & wages combined.


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