It is worth noting that a review of contracting arrangements involving companies is being carried out by Revenue in the South West Tax Region.
This will apply to companies where:
What the Revenue are concerned with for now is the expense deductions being claimed in the personal services company. Revenue’s concern is that in many cases, too small a proportion of the gross contract payment is reported as liable to tax in the hands of the contractor. They have established in many cases that personal or non-business expenses have been ‘put through’ the company and written off against profits for tax purposes.
Inappropriate reclaims of VAT on personal expenses has occurred. Revenue specifically states…”we 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 liabilities…”.
So what does this mean for Contractors? Revenue will have pre-defined parameters regarding levels of expenses that they would expect to see in accounts for one person contractor companies. Limited company accounts for contractors will be the subject of frequent checking and will be a factor in risk-based selection for audit.
Contact Imelda Prendergast Director OSK Contracting t: 01 439 4206. OSK are a leading provider of contractor accounting services to contractors.
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