Contractor Mortgages with Robert Whelan

 

#AskTheExpert Series: Contractor Mortgages with Robert Whelan BComm, QFA, Rockwell Financial Management. COVID has brought with it many challenges.

With work now untethered from place, and with family ties brought into sharper focus, you may well be considering your plans for a move, and therefore a mortgage.  First time Contractors often fear that taking a contract role means giving up the chance to obtain a mortgage.

Thankfully, that is just not true. In fact, you may be in a position to borrow more as a Professional Contractor, as your income is likely to be greater than that of a permanent employee.

As part of our recent #AskTheExpert series, Robert Whelan BComm, QFA of Rockwell Financial Management outlined universal criteria for obtaining a mortgage and the most common Contractor questions on mortgages.

Read on for a synopsis of what was discussed, as well as a look at how Icon Accounting can help you on your mortgage journey.

Universal Criteria for Getting a Mortgage

The standard benchmarks for permanent employees also apply to Contractors:

- Deposit

- Loan to Income

- Repayment Capacity – Everyone is familiar with the struggle of saving for a deposit, but did you know that your behaviour over the past six months can make or break your mortgage application? Demonstrate that you can meet the mortgage repayment you are likely to have by showing evidence of your ability to pay rent/save to the same amount.

- Credit History – Access a forensic analysis of your own credit history, otherwise known as a Consumer Credit Report here.

Did you know that 10% of all mortgage applications can get an exception to rules such as loan to income, deposit, or net disposable income (mortgage repayments cannot exceed a percentage of your net disposable income – typically 40-45%).

When starting your mortgage journey, be aware of the Central Bank rules on mortgages, and if you are looking for an exception, be exceptional.

For example, if your bank has requested proof of repayment capacity and you wish to be granted an exception on your loan to income, show a larger repayment capacity than asked.

Click here to read Robert’s Top Tips for Contractor Mortgages (the do’s and don’ts to be aware of).

Most Common Contractor Questions on Mortgages

- How long do I need to be contracting before I can apply for a mortgage?

Typically, contractors could apply for a mortgage after 12 months in contract, which would demonstrate a continuity of career. However, post-Covid, the banks may be more reticent to consider an application of under two years. This is sector dependent.

- Will I need a bigger deposit as a contractor/Will I be considered higher risk?

No, certainly not.

- What happens if I leave contracting/How long do I have to wait to apply?

Typically, I would advise ex-contractors to wait until they have been in a PAYE/Permanent position for six months.

- What’s changed post-Covid?

Post-Covid, we have seen turnaround times slow somewhat. We have also noticed a greater scrutiny placed on the sector that a contractor is operating within.

How Icon Accounting can help you on your Mortgage Journey

If you are an Icon client who is applying for a mortgage, we can provide the following

- Certificates of Salary

- Three to six-month payslips

- Letter confirming that taxes are up to date

- Tax Clearance Cert

- Copy of previous three years of tax returns

- Financial statements for your limited/umbrella company

- Bank statements for your limited company

If you have any questions about Contracting, the advisory team would be glad to field your questions. You can get in touch here.

If you are already an Icon client, and have any questions on mortgages, reach out to your Account Manager. If you would like to speak directly to a Mortgage expert, contact 01 2966120 or visit www.rockwellfinancial.ie

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy services in Dublin, Ireland.

Budget 2021

 Read our Summary of Todays Budget

Today, the Minister for Finance, Pascal Donoghue, and Minister for Public Expenditure & Reform, Michael McGrath, have announced Budget 2021.

While previous budgets took place against a backdrop of relatively strong economic growth, the backdrop of today’s budget has been the Covid-19 crisis and Brexit.
Since March of this year, we have seen record levels of unemployment and the unemployment rate continues to rise at a high pace due to the pandemic.

Taxation receipts have been stronger than expected, however, the country still finds itself with a deficit of approximately €21 billion for 2020.

The outlook for 2021 is not much better and it is on this basis that most of Budget 2021 has been framed.

Personal Tax

• The retention of existing income tax rates (of 20% and 40%) and tax bands (€35,300 for single individuals and €44,300 for married single earner couples).
• An increase in the earned income tax credit (introduced in 2015 for self-employed individuals) from €1,500 to €1,650 - finally achieving parity with the PAYE credit.
• In a surprise move, the seldom claimed Dependant Relative Tax credit, has seen a jump from €70 to €245. It is estimated that nearly 200 thousand people have a qualifying relative living with them, and they may be more tuned into claiming this now (please note: your children do not qualify you for this credit).
• An increase in the home carer tax credit from €1,500 to €1,600.
• USC rates remain the same, although the bands have changed slightly, to allow for the increase in the minimum wage to €10.20.
• Homeworkers can now claim a portion of their broadband as a tax allowable expense.          
• Children’s allowances are also set to increase €5 for children over 12, and €2 for children under 12, per week, respectively.

Employment and Business supports

• Debt warehousing has been added as a new variant of the employment wage subsidy scheme. This will provide continued support to businesses affected by COVID-19.
• A new scheme, for businesses which have had to close because of COVID-19 Level 3 or higher restrictions, will see grants available of up to €5,000 per week.
• Commercial Rates are to be waived for the rest of 2020.

Corporation Tax

• Changes to the international tax framework were flagged and we should expect Corporation tax to look a little different in future years.

• Corporation tax receipts from multinationals for the first 8 months of 2020 have generated a remarkable €7.5 billion. No changes are made to the headline rate of 12.5% on trading activities, non- trading 25% and surcharges of 20% for estate income and 15% for Professional Services still apply.
• Revised rules for the tax treatment of Intangible assets apply from tonight, this is targeted at the multinational sector, and is linked to a move to a digital tax.
• Digital Gaming Sector – Work will take place in 2021 on the development of a tax credit for the digital gaming sector.

Employers PRSI

• Rates remain unchanged. Though there is a small increase to the weekly income threshold for the higher rate of employers PRSI, this €4 increase brings it to €398 per week.

VAT

• The July stimulus package seen the standard VAT rate drop from 23% to 21% on September 1^st.
• Further VAT cuts were announced in today's budget showing a return to the 9% VAT rate which had previously applied for the tourism and hospitality sector. This change will take place on November 1st.

Entrepreneur Relief

• Changes to this had been suggested by various pre-budget commentators, however, this has been left alone and no changes will take place.
• A slight amendment to the shareholding requirements has been made, allowing some 5% shareholders a greater time span for their qualification to the scheme.

R&D Tax Credits

• No changes to the existing rules in place, and as always, any claim will need to be substantial to ensure value.

Property

• The residential development (stamp duty) refund scheme has been extended until 31st of December 2022.
• The Help to Buy scheme which has proven to be successful for first time buyers trying to get on the property ladder has been extended to the end of 2021.

State Pension

• The planned state pension age increase to 67 has been scrapped.

This will now remain at 66.

Stealth Taxes

• We haven't heard very much of this term of late, but the government have managed to introduce a range of stealth taxes in this budget, primarily for those who a diesel car, have an open fire and enjoy a cigarette!
• The cost of the price of cigarettes has increased by 50 cents.
• Vehicle tax increases, carbon tax increases, vehicle registration tax increases, petrol and diesel increases are all hallmarks of a Green Party power play.

Conclusion

The pandemic has dictated the direction in which this budget was laid before us.

In many ways, lessons learned from 10 years ago are now coming into play, immediate supports for education, reskilling, and retraining are most welcome.
Additional supports for home workers, students studying from home, and those currently receiving the pandemic unemployment payment show that this government is capable of fast response.

Clearly, the health sector will require an enormous amount of funding over the next 18 months, Budget 2021 has achieved this without pain being inflicted on the workers of Ireland.
It remains to be seen if the same scraping and scrimmaging will be available to us in future years.

As always, we will need to see the contents of the Finance Act 2021, where changes, additions and amendments to today’s budget are finalised. 
We will provide further updates when this is published next month.

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy Firms in Ireland. 

Digital Detox - Life Hacks

 Do you check your phone first thing in the morning? Do you find yourself scrolling through social media sites? Do you find it hard to step away from your laptop? Are you glued to your tablet when you are in your bed? If so, you might be a good candidate for digital detox.

Sometimes we only take a pause when our battery dies. We are too busy in our tech that we start ignoring the real-world experiences, more so during these strange times. With the advent of working from home we do not know when to step away from our workspace. The logoff button has somewhat been forgotten. 

Here are some of the tips that might help you train your mind to step out of digital world and prioritise your mental and physical health.   

Set App Restrictions on your Phone

Social media in not so social times can ramp up your hours spent on your phone. It is shown in studies that an individual spends 144 minutes/day on social media sites. This time can easily be saved if we start restricting social media app screen time. Start Slow!! Restrict to 120 minutes initially then try to get down to 30 minutes in a day. Suddenly you will find yourself with a lot of time to do other things.  

Use the 20-20-20 Rule

With all the screen time everyday our eyes get tired. We put a lot of strain on them without knowing. 20-20-20 rule is a very good trick to maintain your eye health. Every 20 minutes look at something 20 feet away for 20 seconds.  

Take Mini Breaks

Work can be really busy sometimes. When we are working from home, we forget that we are not taking coffee breaks like we used to in the offices. We quickly grab something to eat/drink and sit back on our desks. Take small breaks to counter this, go for a walk, stretch out, sit in your back garden.  

Say Goodnight to your Devices at Evening

There was a recent survey that suggested using your mobile phones during evenings can disrupt melatonin production, your quality of sleep and your mood. Make a habit to put a bedtime schedule on your phone or put it on do not disturb so that you are not jumping for your phone on each notification.  

Try using the Rule of Thirds 

Divide your life in thirds: 8 hours for sleep, 8 hours for work and 8 hours for what you want to do. Taking time off from work can drastically improve your productivity. Try picking a lost hobby that you always wanted to do. This way you will find yourself spending less time on screen and going back to things that you really like.  Researches have shown that if you spend more than 40 hours a week in work your productivity starts to diminish.  

Let’s start saying no to our phones, laptops and tablets and yes to exercise, family and hobbies during this pandemic.  

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy Firms in Ireland. 

How Covid-19 has affected Contractor Expense Claims

 Transport tickets are out & ergonomic chairs are in. Since March 2020 contractor expenses have changed dramatically. With some unsurprising new expense claims topping the charts there are some unexpected newcomers…

We have put together a blog on the top expenses our Contractors have claimed through their limited company during Covid-19.

Overall, the results are very interesting and give great insight into behaviours and thinking within the contracting community over the last 7 months.

With the forced move from office spaces to home working the majority of our clients have now kitted out their homes (and bedrooms) with desks, chairs and extra computer & communications equipment.

Unsurprisingly as a result,  office furniture and computer equipment take the top 2 spending spots in our poll. Within that, the most popular items purchased were monitors and chairs to bring a professional and functional working feel as well as comfort to a home office set up.

Interestingly we have also seen an increase in clients taking out life cover through their limited company and setting up for a pension for a rainy day. Perhaps this is a sign of professionals reflecting on their futures and having a little more time to plan, but also demonstrates the income stability within our community to continue to invest in savings options even in turbulent times.

The top 10 expenses claimed since March 2020 were….

1. Office furniture
2. Computer & Mobile Equipment
3. E-workers allowance & Home Utilities
4. Pensions
5. Upskilling with online courses & platforms
6. Life Insurance Cover
7. Hot desks hire
8. Software Subscriptions, e.g. zoom
9. Stationary
10. Travel

One glaring omission from the list is relocation expenses, which has dramatically decreased given the working at home guidelines in the past months and the restriction of movement. It will be interesting to see in the coming months if travel creeps back up the list from 10^th place or if companies will fully commit to flexible remote working arrangements for the contracting community.

Looking at our list- are there expenses that you might you have missed out on claiming?

Speak to your Account Manager to help you maximise your allowances & make sure you have claimed for purchased items that you may not have considered as a business expense thus far!

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy firms in Ireland.

Contractors: 10 Important Tax Saving Tips

 If you are an independent contractor operating in Ireland, you’ll need to declare your income to the Revenue Commissioners and pay tax through the self-assessment tax system.

However, a combination of effective planning and ensuring you avail of all applicable tax reliefs can impact your tax bill. You need to assess your tax saving opportunities in order to maximise your tax credits and increase saving. Ask yourself – what taxes can my business claim?

While we at Icon Accounting are always on hand to help you with your accounting needs, below are some of the most effective tax saving tips that could help reduce your tax liability.

Claim for ‘Allowable Deductions’

Contractors are entitled to claim legitimate business costs as expenses, which can be offset against income. Any expenses are deducted from your profits, so the higher your expenses, the lower your taxable profits. There are many common contractor or freelancer expenses you may be able to claim for, such as: phone bills, motor expenses, insurance costs and materials.

Avoid Penalties

Avoid penalties for the late submission of your tax return. As an independent contractor, tax must be paid on or before the annual tax deadline, based on the income you earned in the previous year. If you don’t pay your tax bill on time, you could be liable for a penalty, which can rise if your payment continues to be late.

        – When is the income tax return deadline 2020?

          The income tax return (AKA Form 11) deadline for 2019’s income is the 31st of October 2020. If you file and

          pay your taxes online, the deadline is Thursday 12th of November 2020.

        – When is the companies office return deadline 2020?

          Depending on ARD Date (initial €100 plus €3 per each day for late submissions).

          Also late accounts require an Audit – Increasing Professional fees.

        – When is VAT returns deadline?

          VAT returns are due 23rd of Month following period end (Bi monthly, Quarterly, 6 monthly or annually)

Claim Medical Expenses

If you pay medical expenses that are not covered by the State or by your medical insurance provider, you can still claim tax relief on those expenses. You will receive tax relief for health expenses at the standard rate of 20%.

Maximise Tax Credits

There may be various tax credits that apply to you, so be sure to review and apply for them where appropriate.

You may be able to:

        – Transfer any unused tax credits from your spouse across to you or apply for joint assessed tax.

        – Ensure you are getting the SPCCC tax credit if you are a single parent.

Claim Assets

Assets including a car, computers, office furniture or any plant and machinery that are required in the course of running your business – can be claimed over a period of 8 years.

Apply for Earned Income Credit

As a self-employed person, you can claim the Earned Income Tax Credit of €1,350 or 20% of your qualifying earned income, whichever is the lower. Be aware, however, that Earned Income Tax Credit can only be applied to trading income and is not available against investment or rental income.

Add Family Members to the Payroll

Wages paid for work done by family members is an expense of the business and its tax deductibility must be considered like any other expense. A family member can be employed for administration or record keeping. This is not considered technical work – if they are being employed for technical work, they should have the skills, qualifications and experience necessary to carry out that work and to justify the rate of pay.

Use the ‘Small Benefit Scheme’

The Small Benefit Scheme allows employers to provide a tax-exempt benefit to Irish employees of up to €500 per employee, per year. This is a totally tax-free gift but must be awarded in the form of a benefits voucher and cannot be paid in cash.

Expense Travel and Subsistence

Travel is an allowable expense when the journey is necessarily incurred in the performance of the duties of the office or employment. Examples of allowable travel are travel to continued professional development courses, travel from place of work to clients’ premises, travel for meetings etc.

Subsistence allowances can be utilised on the same basis – i.e. If the time spent away from the normal place of work is over a certain number of hours/days then specific subsistence rates apply.

Pay into a Pension

Pensions are one of the most tax efficient investments you can make. Any premiums paid by a self-employed person are allowed for tax relief for up to 40%.

Pay into an Income Protection Policy

Like pensions, income protection policies are very tax efficient.  Income protection policy payments allow self-employed persons to claim tax relief for up to 40%.  Income protection is also commonly known as Permanent Health Insurance.

Beware of Professional Services Surcharge

You might think that you can leave the profits in your company and only pay 12.5% corporation tax, rather than taking the money out as salary at up to 52%.

However, this surcharge counters this method of tax avoidance by imposing a surcharge of 15 per cent on 50 per cent of the company’s undistributed professional and service income.

When you eventually liquidate the company you will pay an additional 33% (at current tax rates) – Your effective rate being 46%. You need to consider which is better for you – to have the cash personally now or leave the cash in the company for a number of years saving 6% (at current tax rates).

Get Professional Support

Enlisting the help of a tax specialist, such as Icon Accounting will make sure that you are not only maximising your tax opportunities but by keeping track of the various expenses or tax reliefs that you can claim. We will calculate your income tax accurately, so you don’t run the risk of over- or under-paying and will file the tax return on your behalf and on-time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy services in Dublin.

Introducing - Knowledge Base & Video Library on our iConnect Portal - Icon Accounting

 We are constantly working to include new features on our Icon Accounting portal for our contractors and we are delighted to introduce a whole new section – “Knowledge Base” and “Video Library “

In this section we have covered some frequently asked topics which should give you a better understanding on expenses which can be claimed as a contractor, all you need to know about Tax Returns, Tax Saver tickets and much more!!

If you don’t fancy reading, don’t worry we have you covered! Our new Video Library feature will answer your queries in less than 5 minutes.

Not only that, you can now complete your Income Tax Return on our portal in just few minutes. Simply click on the link and complete your details and you are all set to go!

You can find a guide on completing your Tax Return Checklist from our Knowledge Base here.

If you have any queries when filling in your Tax Return Checklist, please contact our friendly advisory team at taxreturns@iconaccounting.ie

Last but not the least, your Tax Saver tickets can also be ordered directly from our portal with just few clicks.

A detailed guide on how to order a Tax Saver ticket can be found on our Knowledge Base here.

If you have any queries when ordering your Taxsaver ticket, don’t hesitate to contact us at taxsaver@iconaccounting.ie and one of our members will be in touch in no time.

Stay tuned for new updates and we will back with all new features again shortly. Icon Accounting the best Accountancy Firms in Ireland. 

Employee Wage Subsidy Scheme | Accountancy firms in Ireland

 Since the 1st of September 2020, the Employment Wage Subsidy Scheme (EWSS) has replaced the Government's Temporary Wage Subsidy Scheme (TWSS), which has provided wage supports to employers since its launch on 26 March 2020.

This new scheme will run until March 2021, with the possibility of extension after this date.

Under the EWSS scheme, employers in sectors impacted by COVID-19 whose turnover has fallen 30% will now get a flat-rate subsidy per week based on the number of qualifying employees on the payroll, including seasonal staff and new employees.

Eligible Companies

To qualify for the scheme, the company must:

• Have valid Tax Clearance Certificate
• Must be able to demonstrate that the business is expected to experience a 30% reduction in turnover between 1 July and 31 December 2020 looking at the period as whole rather than on a monthly basis; and
• this disruption is caused by COVID-19

Eligible Employees

Employees are eligible if they are in receipt of weekly gross wages between €151.50 and €1,462 or a monthly gross wage between €656.50 and €6,335.33.

Proprietary directors are also eligible for the scheme provided that they are on the payroll within the eligible company and have been paid wages that were reported to Revenue through payroll between 1 July last year and 30 June 2020.

If you have a new employee (new hire or a seasonal worker), they can start the EWSS from 1 July 2020.

Rates

The subsidy amount paid to employers will depend on the gross income of each employee.

EWSS will give a flat-rate subsidy to qualifying employers, based on the number of qualifying employees on the payroll.

• For every employee paid between €203 and €1,462 gross per week, the subsidy is €203.
• For every employee paid between €151.50 and €202.99 gross per week, the subsidy is €151.50.

No subsidy is paid for employees paid less than €151.50 or more than €1,462 gross per week.

Income tax and PRSI deductions

Under the EWSS, employers will have to resume the normal requirement to operate PAYE on all payments. This means you should resume the regular deduction of income tax, USC and employee PRSI from your employees’ pay.

If an employment is eligible for the subsidy, a 0.5% rate of employer’s PRSI will apply.

Eligibility Review

On the last day of every month, you must complete a review to make sure you continue to meet the scheme’s eligibility criteria (looking at the period as a whole rather than on a monthly basis). If you no longer qualify, you must:

• De-register for EWSS through ROS with effect from the 1st day of the next month
• Stop claiming the subsidy

The requirement to do an eligibility review does not apply for July 2020 and the final month of the scheme.

You can get more information on eligibility reviews in Revenue’s EWSS Guidance here.

Compliance checks

Revenue will be contacting employers in the future to check records relating to the operation of the scheme including:

• Evidence that you meet the eligibility criteria, specifically the reduction in turnover
• Details of monthly eligibility reviews

More information on compliance checks will be made available by Revenue.

Proofs required

Applications for EWSS are based on self-assessment principles. This means you will not have to provide proof of eligibility to Revenue at the registration stage. Revenue will review eligibility in the future, based on risk criteria.

You should keep proof of your eligibility for the scheme (evidence of reduction in turnover and other evidence).

Registration for the Scheme

A separate registration process is required for EWSS as the eligibility criteria differs from the eligibility criteria for TWSS.

As part of the registration process, employers or their authorised agents are now required to sign a declaration.

Please also note that Revenue will publish a list of employers who operated the EWSS at the end of January 2021 and April 2021.

if you are looking for Accountancy firms in Ireland, & if you have any questions on contractor accounting and accounting services.

Please do not hesitate to contact us on plcaccounts@iconaccounting.ie for more information.