Contracting in Ireland

[Andy83]

Hi

I'm new to this contacting game so I've spent most of the last month hunting for answers (or questions to answer) regarding contracting in general and ltd liability companies, taxation etc. I figured it was best to know what I'm talking about before I got my first contract.

Anyway, I had a pretty good idea about how to go about it, such as paying a reasonable (market rate) wage, claiming expenses, pensions, dividends, etc. But, this has now become more complicated as I am pretty sure I'm about a get a contract in Dublin, it will be a 12 month contract.

The way I read the rules about the 280 days over two tax years it states that you become a tax 'resident' if you're in Ireland for longer than that period, but tax resident simply changes the scope of your tax from Irish income to worldwide income. So all this talk of not staying in the country too long and tax residency is pointless as I would have to pay tax on my Irish income no matter what.

This now means I would need to register for Irish PAYE. If I have a UK ltd company, registered in Ireland so my wage goes through the Irish PAYE, but all profits, expenses, dividends etc are sorted in UK is that valid?

Or would I be better off creating an Irish company and registering everything there (afterall Ireland is supposedly a tax haven)?

I'm very wary about umbrella companies. It is vague exactly what is taxed and how much I get at the end. Should I be worried, do umbrella companies take significantly more from you?

Any help is appreciated here as I'm getting more confused and feel like these tax laws are deliberatly vague and confusing to catch out people who make a mistake. I resent the fact that someone with an expensive accountant seemingly is able to pay lower tax rates than those not in the know.

[malvolio]

It's not a game, it's a life choice...

Anyway, as you have found, it's also a minefield, It's the UK residency that matters initially and you're still likely to end up as a UK resident taxpayer, so the company location is not that critical, except that if you then switch back to UK work, UK agencies won't deal with non-UK companies. My gut feel is to work the whole thing out of a UK company, but I'm no expert.

There is a DTA between the two countries so you won't get taxed twice on anything but clearly you need to estabish which is the better deal. Unless someone actually has chapter and verse on it on here I suggest you get professional advice on this one...

Oh, and brollies are expensive since they trade income against simplicity and safety (well, the good ones do, anyway). Only use them if you really can't (or don't want) to run your own company.

[ShandyDrinker]

Being just about to finish a 6 month stint in Ireland I would agree with Malvolio's comments about seeking professional advice.

You are right that you have 3 main options, UK Ltd, Irish Ltd or Umbrella. You will probably be skinned alive going through an Irish umbrella - the proportion you will be left as take home will not be great (have a look at Icon accounting tax calculator as an example). I didn't research the Irish Ltd route but suspect it could be quite good if you want to work there for over 6 months (you state it is a 12 month contract). I gather you'd have to carefully research how expenses work with Irish Ltd companies from listening to the people I work with who have used that approach.

To keep everything above board I used my UK Ltd company but registered with the Irish revenue and got a 6 month exemption from PRSI providing I could prove to them I was paying PAYE in the UK which was easy enough to do.

[BlasterBates]

You are taxed where you do the work. I once did about 4 days work in the UK in the whole year and it was taxed there. An important point, you don't decide where you're taxed, that's decided by the rules and the relevant tax authorities. Don't start thinking you have a choice, you don't, other than you can actually choose the physical location. It's not up to you to decide where you want to be taxed, it's up to you to find out where the tax should be paid. Tax residency refers to when you are taxed on all income and normally where you pay your social security, being tax resident in a country other than the country you are working in does not exempt you from tax in the country you are working in.

[borderreiver]

Ah, but surely the tax residency of a LTD is a bit more complicated than that?

Sure, if a UK LTD has only one director and that director works for 6 months in Ireland, then that's clearly taxable in Ireland, but what if there are other directors based in the UK?

I seem to remember reading that the tax residency of a company is deemed to be "wherever the directors meet", although that's surely something that can be challenged if meetings occur by phone, Skype or whatever.

[BlasterBates]

It isn't simply a case of where your business is based it's whether you're doing business in the country in question. If you have a contract there with a client then clearly you are and they would expect you to be registered and pay tax on it.

The authorities would expect you to register a branch of your Ltd in that country and submit a separate set of accounts for the work you do there, obviously it makes sense for a short term contract just to use a local brolly.

In other words your Ltd would be resident in two countries, and the Irish authorities would expect tax on your Irish activities, but not on your UK activities. For this kind of thing you can get into serious bother. You would also potentially need to claim back the tax on your UK co. You will also have the VAT officials breathing down your neck.

[borderreiver]

I see what you mean, but surely if that principle were adhered to in all cases it would mean that even companies sending a non-director consultant abroad just for a couple of days, e.g. to a Dublin-based client to provide project support, would have to register in Ireland for those couple of days for tax purposes. Isn't that overkill?

I have no problem with paying corporate tax in different countries if it's necessary, it's the overhead of registration, authenticated translation of company documentation - in most EU countries at least - and 2 sets of accounts (and accountants' fees!) that I would want to avoid in that situation.

Cheers

[BlasterBates]

I see what you mean, but surely if that principle were adhered to in all cases it would mean that even companies sending a non-director consultant abroad just for a couple of days, e.g. to a Dublin-based client to provide project support, would have to register in Ireland for those couple of days for tax purposes. Isn't that overkill?

I have no problem with paying corporate tax in different countries if it's necessary, it's the overhead of registration, authenticated translation of company documentation - in most EU countries at least - and 2 sets of accounts (and accountants' fees!) that I would want to avoid in that situation.

Cheers

Yes that would be overkill, but a 3 month contract wouldn't. Going with a local brolly is always the safest way. If you're not liable for tax the local accountants will tell you.