Contracting in Ireland via a UK LTD Company

Contracting in Ireland via UK LTD Company isn’t a new phenomenon, but nonetheless it appears to be a hot topic in the current market. Is it due to Brexit, is it not? Either way, there’s appears to be increased interest from UK professionals considering contracting in Ireland. I recently read an article that referred to a survey carried out by Deloitte which showed that 36 per cent of non-British workers currently in the UK, say they are thinking about leaving by 2022, with 26 per cent planning to move even sooner, by 2020. Has this concept been amplified with social media where more UK professionals are now seeking work opportunities elsewhere? But just what are the impacts, obligations and responsibilities when using a UK Ltd Company while contracting in Ireland? Below are some suggested points to consider:

1)   Examine the duration of the Contract The duration of any contract in Ireland is a key factor in determining the tax obligations and duties. Where a contract is < 30 days, there is no requirement for the UK LTD Company or individual to operate PAYE in Ireland. Where a contract is > 30 days and < 60 days there is no requirement to operate Irish PAYE provided all of the below criteria are met: 1)      Employee resident in Double Taxation Agreement (DTA) State and not resident in Ireland; 2)      Genuine “foreign employment”; 3)      Individual not paid by an Irish Permanent Establishment (PE); 4)      Duties performed in Ireland ≤ 60 days. Where a contract is > 60 days but less the 183 days, the conditions become more complex for the exemption of operating PAYE in Ireland. In cases where all of the below conditions are meet, a UK LTD Company is exempt from operating PAYE while contracting in Ireland. 1)         Employee resident in Double Taxation Agreement (DTA) State and not resident in Ireland; 2)         Genuine “foreign employment”; 3)         Individual not paid by an Irish Permanent Establishment (PE); 4)         The UK LTD company has registered in Ireland as an employer for PAYE AND 5)         Maintains a record of the full name, latest Irish and overseas address, date of commencement and cessation of individual, location where individual carries out duties of temporary assignment and amount of earnings in relation to temporary assignment AND 6)         Signs a written acknowledgement that in all cases where a liability is subsequently found to arise that they will pay any Irish PAYE that should have been paid AND 7)         Supplies evidence (e.g. payslip/ statement from HM Revenue & Customs) of PAYE being operated in the UK on the duties performed in Ireland AND 8 )        On request, supplies a copy of the contract relating to the employer’s engagement in Ireland; AND 9)         Seeks clearance from Irish Revenue Commissioners by 21 days after the date the Contractor takes up the duties in Ireland. On receipt of written confirmation from the Revenue Commissioners, Irish PAYE need not be operated. If the above conditions are not met, the UK LTD Company should apply Irish PAYE by reference to the duties performed in Ireland, but should review the position after the end of the tax year to see if a refund is available under the relevant DTA. Where a contract is >183 days the UK LTD company must apply Irish PAYE by reference to duties performed in Ireland.

2)   Alleviating Risk As a starting point, examine the duration of the contract. In our experience, most contractors fall within the two categories of, > 60 days but less the 183 days / and >183 days. Where a Contractor insists in operating via a UK LTD Company for the contract of > 60 days but less than 183 days, it is advisable for an agency to request a copy of the written confirmation the UK LTD Company has obtained from the Revenue Commissioners which outlines that Irish PAYE need not be operated by the UK LTD company. For contractors carrying out projects greater than 183 days, it is recommended to check the UK Ltd company has been registered for Irish Tax and VAT in Ireland, and the individual holds an Irish PPS Number. Evidence of tax clearance can also be sought from long term Contractors as it is likely the Company will be tax resident in Ireland.

3) Determining Tax Residence Undoubtedly, many Contractors may wish to operate via a UK LTD Company due to the UK’s attractive dividend structure, however it is likely that the tax residency of the UK LTD Company can be significantly impacted if all income and control of the UK LTD Company is carried out from Ireland. This intensifies the prospect of the UK LTD Company becoming tax resident in Ireland. Where all income is derived from the contract in Ireland, with only one Director of the UK LTD Company operating in Ireland, such factors are key indicators to highlight the risk of the UK LTD Company becoming tax resident in Ireland. This results in all Company profits subject to tax law under the Irish jurisdiction and no longer the UK.

4) Considerations Increasingly, there is a movement where many agencies and clients require Contractors to operate under an Irish Ltd Company from Day One of a Contract. For Contractors, it's important to know your agency’s procedures and options available to operate or not via a UK LTD Company. In the case of using a UK LTD Company when contracting in Ireland, ensure the UK Company is registered as an employer in Ireland if contracting > 60 days but less the 183 days. Ensure the UK Company has secured written confirmation from the Revenue Commissioners, confirming Irish PAYE need not be operated. If contracting over 183 days in Ireland via a UK LTD Company, ensure that Irish PAYE is applied and be aware of the potential risk of the UK LTD Company becoming tax resident in Ireland. In cases where it is not possible to operate under a UK LTD Company, there is the option to establish an Irish LTD Company whereby the UK Company is the shareholder of the new LTD Company. Again, examine the duration of the contract and in cases where a Contractor will remain tax resident in the UK, a dividend can be taken from the Irish LTD Company to the UK LTD Company. Alternatively, Contractors can avail of an Umbrella Company solution which provide immediate access to a set up. If you are considering contracting in Ireland, feel free to contact our office for further information and assistance - 01 8077106.  

Author:         Claire Fagan, Director, July 2017