Do I need to be a PAYE employee of my own Ltd company

beer enigma

Ok quick question that I've had varied answers on.

I'm an IT contractor and the company I contract to insist that I operate under a Ltd company. This was set up, but my accountant has always maintained that I have to be a PAYE employee of my own company - that bit I don't understand.

I don't have enough information to challenge and am currently looking for another accountant anyway, so would like to be clear before I search for a new one.

I's this the most beneficial way ? - he mentioned it was to use my tax credits but I don't seem to be getting any other benefits from it apart from claiming some limited expenses through the company. I'm not looking to fiddle the system, more trying to understand what would be best and be in a position to explain to a new accountant what I'm after.

Thanks

John_Mc

beer enigma wrote: »

Ok quick question that I've had varied answers on.

I'm an IT contractor and the company I contract to insist that I operate under a Ltd company. This was set up, but my accountant has always maintained that I have to be a PAYE employee of my own company - that bit I don't understand.

I don't have enough information to challenge and am currently looking for another accountant anyway, so would like to be clear before I search for a new one.

I's this the most beneficial way ? - he mentioned it was to use my tax credits but I don't seem to be getting any other benefits from it apart from claiming some limited expenses through the company. I'm not looking to fiddle the system, more trying to understand what would be best and be in a position to explain to a new accountant what I'm after.

Thanks

Your accountant is incorrect. I'm also an IT contractor with my own LTD company and I'm a director, so not PAYE.

You still get tax credits although not as much as PAYE. Currently it's 1100 vs 1650 I think.

There are pros and cons to each but there's no reason why you must remain as PAYE

IR1SH RANG3R

From my understanding of it the limited company is a separate legal entity to yourself. The company is the entity that makes the money etc. If you want to withdraw funds from the company you will have to pay yourself (eg directors remuneration) and will pay personal tax on this. If you are not planning on keeping the money in the company for development/investment setting up a company isn't a great way to go about it as you're essentially being hit for tax twice (the company and personal). Someone might confirm but I'm pretty sure on that

Mooooo

Would being a sole trade be more straight forward? Is this the only company you work for? If so the company may be worried about revenue telling them you should be an employee I've heard they were trying to crack down on contractors working for only one client. Have a lad working for me and he is a sole trader but also works elsewhere and his hours wouldn't be standard every month.

beer enigma

Thanks, I am a Director of my own company just like John_Mc, the company I contract to insist that I operate under a Ltd company, so no choice there.

I don't see why I can't just pay myself as a Director, rather than PAYE, I've always thought that would be the more beneficial way. Sadly my accountant isn't the most approachable which is why I'm moving.

beer enigma

Mooooo wrote: »

Would being a sole trade be more straight forward? Is this the only company you work for? If so the company may be worried about revenue telling them you should be an employee I've heard they were trying to crack down on contractors working for only one client. Have a lad working for me and he is a sole trader but also works elsewhere and his hours wouldn't be standard every month.

I contract to one company only, Vodafone, its a long term day rate, but they do insist on Ltd.

MFS2

beer enigma wrote: »

Ok quick question that I've had varied answers on.

I'm an IT contractor and the company I contract to insist that I operate under a Ltd company. This was set up, but my accountant has always maintained that I have to be a PAYE employee of my own company - that bit I don't understand.

I don't have enough information to challenge and am currently looking for another accountant anyway, so would like to be clear before I search for a new one.

I's this the most beneficial way ? - he mentioned it was to use my tax credits but I don't seem to be getting any other benefits from it apart from claiming some limited expenses through the company. I'm not looking to fiddle the system, more trying to understand what would be best and be in a position to explain to a new accountant what I'm after.

Thanks

I think there might be a bit of confusion here. While you trade through a limited company which isn't unusual for your sector, if you draw a salary from your company, it must be accounted for through payroll ie Income Tax / USC / PRSI.

There are other advantages to having a company including the expenses mentioned above and indeed for pension planning.

Also, if you withdraw the company profits by way of salary, there is no company profit on which to pay tax. I always advise that the only real reasons to have a limited company is either for the use of limited liability, tax reasons (only works if you can leave the monies behind in the company and not withdraw as a salary) or pensions.

Beware Revenue by the way as they are actively looking at contractor companies such as this and are looking at the expenses being claimed.

PM if you like, happy to help

beer enigma

MFS2 wrote: »

I think there might be a bit of confusion here. While you trade through a limited company which isn't unusual for your sector, if you draw a salary from your company, it must be accounted for through payroll ie Income Tax / USC / PRSI.

There are other advantages to having a company including the expenses mentioned above and indeed for pension planning.

Also, if you withdraw the company profits by way of salary, there is no company profit on which to pay tax. I always advise that the only real reasons to have a limited company is either for the use of limited liability, tax reasons (only works if you can leave the monies behind in the company and not withdraw as a salary) or pensions.

Beware Revenue by the way as they are actively looking at contractor companies such as this and are looking at the expenses being claimed.

PM if you like, happy to help

Thanks - I'll take you up on that, need to get my head around it before I open the door to a new accountant.

IR1SH RANG3R

IR1SH RANG3R wrote: »

From my understanding of it the limited company is a separate legal entity to yourself. The company is the entity that makes the money etc. If you want to withdraw funds from the company you will have to pay yourself (eg directors remuneration) and will pay personal tax on this. If you are not planning on keeping the money in the company for development/investment setting up a company isn't a great way to go about it as you're essentially being hit for tax twice (the company and personal). Someone might confirm but I'm pretty sure on that

You are incorrect.
Take your salary, pay tax on that.
If there's noting left that the Ltd company won't be paying corporation tax on the "profit" as there is none.

John_Mc

Get a new accountant before anything else. You're paying them for advice more than anything else

srsly78

John_Mc wrote: »

Your accountant is incorrect. I'm also an IT contractor with my own LTD company and I'm a director, so not PAYE.

You still get tax credits although not as much as PAYE. Currently it's 1100 vs 1650 I think.

There are pros and cons to each but there's no reason why you must remain as PAYE

Still not correct. Proprietary director counts as self-employed, but their salary is subject to PAYE. However they don't get PAYE tax credit they get the new self-employed one.

So yeah but no but yeah. Self-employed PAYE prop director IT contractor here

OP - yes your salary is subject to PAYE!! However you could just pay yourself a salary of zero and not bother with it really. Instead pay the whole lot in one go at year end.