Contracting in Ireland through CPM
Contracting in Ireland through CPM - Factsheet 103 (PDF)
Factsheet 103
If you stay for longer than six months, you will be subject to Ireland's tax system. Up until this time, you can legitimately operate through CPM as your UK based company. CPM is registered with the Office of the Revenue Commissioners for PAYE/PRSI.
The government body responsible for taxation in Ireland is called the Revenue Commissioners. All tax rates, allowances and reliefs are determined by Government policy and implemented by the Revenue Commissioners. The income tax year, which previously ran from 6 April to 5 April, is to be aligned with the calendar year. Every company has to ensure that all their taxes and other deductions for their employees are paid and that all relevant documents are up to date and submitted by this date. Penalties are payable if you do not comply. Employee taxes and deductions are normally submitted to the Revenue Commissioners on a monthly basis.
Under the system, employers are responsible for calculating, deducting and collecting the various taxes and national social insurance contributions (PRSI) to be paid by every employee. The employer then sends these payments onto the Revenue Commissioners. All employees are also eligible for various allowances and reliefs to offset against tax.
Operation of Pay As You Earn (PAYE)
This is income tax and is paid at two rates after allowances and reliefs have been calculated: 20% and 42%. The minimum amount at which a person starts to pay tax can change every year according to Government policy.
Tax Credit System from 6 April 2001
The tax credit system will replace the existing tax-free allowance based system. The move to a tax credit system has been facilitated by the gradual standard rating of tax allowance in recent years.
Calendar Tax Year from 1 January 2002
The income tax year, which previously ran from 6 April to 5 April, is now aligned with the calendar year. The move to a calendar tax year took effect from 1 January 2002. The first calendar tax year, 1 January 2002 to 31 December 2002, was proceeded by a short transitional tax "year" running from 6 April 2001 to 31 December 2001.
For the short tax "year" an individual paid tax only on his/her earnings/ income in respect of the period from 6 April 2001 to 31 December 2001.
In general, all allowances, credits, bands, exemptions limits and other annual amounts will be adjusted, where relevant, from their full year value to take account of the short tax "year" i.e. from 6 April 2001 to 231 December 2001. The amounts will be adjusted to 74% (i.e. 270 days/365 days) of the normal annual amounts.
With the introduction of a tax credit system from 6 April 2001, the procedure for calculating tax on an employee's salary/wage has changed.
Tax Tables and Table Allowances will no longer be a feature of the PAYE system.
Under the new tax system, tax is calculated at the appropriate tax rate(s) on gross pay (less superannuation and contributions to a Revenue approved permanent health benefit scheme) to arrive at gross tax in respect of each pay period (eg. weekly). Gross tax is reduced by the tax credits due, to arrive at the net tax payable.
Gross Tax less Tax Credits = Tax Payable.
The appropriate rates of tax are:
20% on gross pay up to the standard rate cut-off point for each pay period.
42% on gross pay (if any) over the standard rate cut-off point for each pay period.
The adjustment required to the standard rate bands in order to arrive at the appropriate standard rate cut-off point for individual employees will be made at the tax office.
New Procedures
The tax office will, in respect of each employee, notify the employer of the tax Credits
Standard Rate Cut-Off Points and rates of tax to be used in the calculation of weekly/monthly tax.
The allocation of weekly and monthly tax credits and standard rate cut-off point is made by the tax office. For the short tax "year", the allocation is determined by dividing the total amounts by 38 for weekly paid employees and by 9 for monthly paid employees. For a full calendar tax year (i.e. from 1st January 2002 onwards), the normal 52 weeks / 12 months position will apply.
The standard rate tax bands have widened for tax year 2001 so the first €28,000 of your total income is taxed at 20 per cent and the remainder at the higher marginal rate of 42 per cent. Under the new tax credit system, allowances are deducted from this initial amount to determine the final tax payment. The Single Person's Allowance is currently €5,210.
Unlike other countries, Ireland does not impose state, city, local or church taxes effectively reducing the amount of overall tax paid. Social security contributions are called Pay Related Social Insurance (PRSI) and are deducted by CPM.
If you are a foreign national working in Ireland liability to PRSI depends on the length of your assignment, country of origin and country in which the employing CPM company is located. Nationals of European Economic Areas (EEA) are not liable for this payment in Ireland if they continue to pay social security in their home country.
Please note that the Irish tax year no longer runs from the 6th to 5th April but from 1st January to 31st December.
- Ireland Revenue Site - http://www.revenue.ie
About CPM
Based at Haseley Manor in rural Warwickshire, the philosophy behind the company is simple – make life for the freelancer as easy and straightforward as possible by providing comprehensive administrational support services, allowing them to spend the maximum amount of time doing what they do best – IT contract work.
CPM aims to provide IT-specific administration services to the tens of thousands of freelance contractors in the United Kingdom more cost effectively than those offered by traditional accountancy practices.
It provides a comprehensive portfolio of services, which can be tailored for every freelance UK IT professional, and specialist working at home or abroad, whether they are working as a consultant or as a freelance operative within a management, support, programming or hardware structure. They may also be operating on a PAYE Limited company or self-employed basis.
CPM is managed by a team of former IT industry employees who genuinely understand the individual needs of the freelance contractor. These include founder Solomon Williams, a Chartered Certified Accountant, who has extensive experience in a variety of business start-ups and operations throughout the UK and Europe.
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Disclaimer: The information contained in this factsheet is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts Involved. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in information contained in this factsheet. Accordingly, the information on this factsheet is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a CPM professional.