As you may be aware the Revenue Commissioners have launched a review of tax compliance by contractors in the Munster region. Revenue are focussing on both the One Contractor One Company and Composite/Umbrella company structures.
This project has been so successful for Revenue that they are rolling the review out nationally with immediate effect.
We recently met the Revenue Commissioners review team in Cork to assess their progress in this project.
The key issues we learnt are:
• Revenue believe a large number of contractors are over claiming home office and travel costs.
• Revenue have predefined parameters they are using to identify contractors to be audited.
• Once identified for audit, Revenue have specified levels of ‘unvouched expenses’ they are prepared to accept without penalty for the contractors.
• If contractors have levels of expenses which Revenue believe are unjustified, Revenue are seeking to charge interest of 12% pa and penalties ranging from 10% (unprompted disclosure) to 100% (liabilities discovered in audit) of the tax liabilities.
Following our meeting with the Revenue Inspectors, we are familiar with the audit parameters and unvouched expenses thresholds Revenue are utilising in this review.
Noone Casey are acting for numerous contractors in their negotiations with Revenue using our industry knowledge and the specific knowledge we have obtained in our meetings with Revenue.
If you are or have been contracting in the past 4 years and have any concerns over your tax compliance, feel free to contact me firstname.lastname@example.org or 01 6766476 for a free, confidential review of your tax status.
So, the Revenue Commissioners have announced a review of ”the tax affairs of companies and their directors, where the main source of income is a contract or contracts “for service” with a larger company or companies (directly or through intermediaries), the company in question does not appear to have a substantial business separate from these contracts, and in most cases the director(s) are the only employees of the company and pay tax through PAYE”.
Revenue have “established that in many cases there are deficiencies in accounting for input costs and expenses, with the result that there has been a significant understatement of tax liability to the benefit of the director(s)”.
In other words, Revenue believe contractors are over claiming expenses relative to their work profile.
It is our understanding that Revenue are also examining the Umbrella/Managed company status of many contractors. There is real concern that the PRSI class applicable to many contractors operating through Managed companies is incorrect and substantial liabilities may exist.
This review is being carried out in the Revenue South West region incorporating Cork, Limerick, Kerry & Clare.
At Noone Casey we look after the tax affairs of many hundreds of contractors using our real time online accounting tool I-Finance. We ensure only appropriate expenses are claimed thus avoiding the issue of underpayment of taxes.
I-Finance is structured so that you
• Operate as a proprietary director of your own limited company. Why is that important?
o You have greater control over your own money – no 3rd parties controlling the bank account.
o You have no exposure from Revenue should they move against the umbrella/composite company structures.
o You can maximise simple tax saving techniques which are not available in a Sole Trader/Umbrella Company structure.
• We process all the financial administrative tasks relating to your contract – which gives you more time to focus on the things you want to do.
• We prepare and issue all your client-approved invoices.
• You dictate how much you want to be paid, we process the payroll for you and make sure all your PAYE/PRSI is correctly deducted and returned on your behalf.
• We monitor your company bank account and assist you execute a ‘same day payment’ model via online banking into your personal bank account.
• We offer you up-to-date advice on all allowable business related expenses.
• We prepare and file all your annual returns (both personal and company related).
• We advise you on how to financially plan for the future and assist you in selecting the best savings and investment options for you personally.
If you are operating as a contractor in the Munster region and have concerns over the expenses you have claimed and /or your Managed company structure, contact me today email@example.com or 01 6766476 to discuss your affairs.
We will advise you on the correct route out of your potential difficulties.
While Agency workers do not have the same employment rights as regular workers, under the EU Directive on Temporary Agency Work, Temporary Agency Workers have the right to equal treatment regarding basic employment conditions. The Act applies to Agency Workers employed by an Employment Agency who are assigned to work for a temporary period to another Organisation. The Act may exclude employees under a Managed Service Contract which is a Contract for Services, for example, cleaning, where the Contractor is responsible for managing and delivering the service. The Act does not apply to work done in the course of a Work Placement Scheme or any publicly funded Vocational Training or a Re-training Scheme. Pay is defined as including only basic pay, shift premium, piece rates, over-time premium, unsocial hours premium and Sunday premium. Pay does not include Occupational Pension Schemes, Financial Participation Schemes, Sick Pay Schemes, Benefits-in-Kind or Bonus Payments.
A report by PricewaterhouseCoopers has shown that there may be more jobs made available for IT contractors, as a direct result of financial services companies being severely affected by cybercrime.
Many IT, Engineering and other Professional Contractors who use composite company structures may be facing large PRSI liabilities as Revenue and DSFA challenge the PRSI status of such contractors.
Contractors who hold only15% of the shares in a composite company may not be entitled to Class S PRSI status; employers PRSI of 10.75% will fall due in those circumstances. Class S status is only applicable to those shareholder/employees who control their companies. A 15% shareholding with up to 6 other contractors who may not know each other does not suggest control.
Noone Casey has developed I-Finance an online realtime accounting solution for professional contractors to address this concern & to legitimately maximise the tax advantages of contracting.
Have a look at our short video here to get a better understanding of the issues involved. If you feel this affects you, contact Noone Casey for an independent assessment of your position.
I-Finance uses the Limited Company type structure thus avoiding the employers PRSI issue. The table below gives you an idea of how each of the common contracting structures compare.
|Company Structure Type
||You own 100% of your own company
||You have no ownership
||You own 15% of an externally controlled company
||You and your appointee are directors of your own company
||You have no directorship
||You and up to 6 others are directors of the company. You may not know the other directors.
||You are the employee of your own company
||You are an employee of the umbrella company
||You are an employee of the composite company
||You are entitled to tax deductible expenses through your own company
||You are not entitled to any expenses
||You may be entitled to a lesser amount of expenses
||You can use your own company to assist in appropriate tax planning opportunities
||You cannot use the umbrella company to assist in your tax planning
||You cannot use the composite company to assist in your tax planning
||We ensure you manage your affairs in full compliance of all taxation and PRSI legislation
||You are treated as an employee and have taxes deducted appropriately
||The Revenue Commissioners are examining the appropriateness of the PRSI structures of composite companies