TAX LIABILITY FACING PROFESSIONAL CONTRACTORS
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.
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||Limited Company||Umbrella Company||Composite Company|
|Ownership||You own 100% of your own company||You have no ownership||You own 15% of an externally controlled company|
|Directorship||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.|
|Employment||You are the employee of your own company||You are an employee of the umbrella company||You are an employee of the composite company|
|Expenses||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|
|Tax planning||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|
|Tax appropriateness||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|