Sub-Contracting
Increasingly large companies are not employing staff, they are sub-contracting work out to sole traders. The advantage to a sole trader is a large bulk work that will keep an income rolling in for several months. The first step is determining if you are employed or self-employed and the Revenue have a strict guideline to know which you are.
An employee
- They are directed on how, when and where to work
- have set working hours laid down by the employer
- have no personal financial risk relating to the work been carried out
- They receive a fixed salary
- Supply labour only
- Cannot subcontract their work out
- Are covered under the employer’s insurance
- Work for only one person or business.
Self-employed
- They control how, when and where the work is done
- Control their working hours
- Are exposed to financial risk
- They control costs and pricing
- Can hire other people to complete the job
- Provide their insurance cover
- Own their business
- Can provide the same services to more than one person or business at the same time.
If you fit into the category of been self-employed and work in construction, meat processing or forestry industries. Then you will be taxed under the Relevant Contracts Tax system. This was formerly known as C45 tax. It places the responsibility on the person hiring, the main or principal contractor to collect your tax. This occurs if you don’t have a good tax record for the last 3 years. Note you will still need submit an end of year tax return. It just means the revenue has you taxed at source if you have a bad history with them.
The rates are
You are taxed at 0% if you have a good tax record over the last 3 years.
Tax at 20% is mainly if you are unregistered with compliance issues or outstanding returns
The principal contractor must issue you an RCTDC certificate as proof the tax was paid on your behalf. You do not charge VAT to the main contractor, however, you will still need to register for VAT if your gross income is above €37,500 per year.
