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What are the pros and cons of setting up an Irish company for trade in Ireland?

What are the pros and cons of setting up an...

My client is a UK Ltd Co but is currently doing a number of projects in Ireland. The end-customer has now signed up for more contracts, worth >£1m in the next 12 months. This is around 25% of total turnover.

On a cost basis, it's worth setting up an Irish office as they're currently paying for staff and materials to travel across for weeks at a time, so it makes sense to employ staff based in Ireland. What are the pros and cons of actually setting up an Irish company, as opposed to running it through the UK Ltd Co?

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02nd Mar 2016 08:44

We tried

to set up an Irish company a while ago. It is fiendishly difficult and expensive. Our client gave up.

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By Macey
02nd Mar 2016 11:00

Extortionate!

Best quote we received for a single director monthly payroll was 1,200 euro's pa !

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03rd Mar 2016 08:32

Thanks

To be honest, we'd rather not do it, but want to make sure we give our client the best advice.

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03rd Mar 2016 09:14

Company
From experience, some people like to trade with people from their own country (I once worked for a company that established a base in Scotland and customers actually preferred to deal with a company registered in Scotland "SC" Co. Reg. - I am not sure if it is similar in Ireland / your clients industry?).

As a separate issue, has your client registered for VAT in Ireland ?

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03rd Mar 2016 09:19

To date, they've been making a few sales to Ireland so it's been in the UK VAT returns. It's about to step up a level, which is why they're looking at an Irish branch or company.

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03rd Mar 2016 21:53

I am based in Ireland but am not working in an accounting firm now but did work in a fairly large firm up to a few years ago.  I am not a tax expert. 

Here are some comments.

Is it worth setting up a company in Ireland? Possibly, depending on how long the business is expected to continue in Ireland.  If the contracts are likely to be for one year only, it might not be worthwhile.  If there are longer term prospects, then it may be worth considering.  Some tax advice might be required.  The corporation tax rate is 12.5% and tends to be attractive for many foreign companies.  

I disagree with The Inkeeper: although possibly more expensive to incorporate in Ireland, the full process can be carried out for under €300 if you look around and within a few days too.  There may be some anti money laundering / know your client checks but they are now a feature everywhere you turn.  I would recommend going direct to a company formation agency rather than to an accounting firm for this work as the accounting firms just use the agents anyway and charge a big markup.  I have no connection with them but I have found www.formations.ie very helpful, although they are not the cheapest out there.  

What can take some time is opening a bank account (for any type of entity, UK or Irish).  Only RBS in the UK has an Irish offshoot so you would very likely need to send someone over to Ireland to open an account at an Irish bank with lots of original or notarised documents and authorisation.  And since they got a bad reputation during the crash, the Irish banks have gone to the other extreme with their frustrating box-ticking and hoop-jumping.  Prepare for frustration here - and don't expect one to be better than another; in my limited experience, they all promise commitment and service but they are all equally hopeless.  They all have some form of electronic banking which can simplify a lot of stuff.  You may also have currency issues as Ireland is in the euro.  

So far as I am aware, it is not a legal or tax requirement for your client to register a company in Ireland.  It is possible to carry on its business as part of the UK company and this would be simpler if all that is happening in Ireland is activities to deliver services contracted for by the UK company.  It is quite easy for a UK company to register for taxes in Ireland, specifically for PAYE and VAT.  The Irish Revenue's online system is, in my opinion, much superior to the HMRC system.  We don't have RTI etc and filing returns is very straightforward, although it may take a bit of getting used-to.  You mention contracts, staff, materials in relation to your client. If it is in the construction sector, it may be affected by Relevant Contracts Tax and there is more info on that at http://www.revenue.ie/en/tax/rct/non-resident-contractors.html.  That has become more web-based since I last had to deal with it.  It gets a lot of Revenue attention so your compliance will need to be good.  

Payroll is different to the UK but if you have a payroll person who is reasonably intelligent, they should be able to handle Irish payroll themselves.  In my opinion, the simplest and best Irish payroll software package is www.collsoft.ie which costs €150 plus VAT.  It would be quite easy to find someone to do a single person payroll for well under €1,000 - I suspect that Macey may have gone to a larger firm - I'm sure that many smaller operators would be very happy with a fraction of that, probably low hundreds for the year.  Again, AML/KYC creates a compliance overhead, regardless of the number of employees being paid.  

 

Irish VAT is very similar to UK VAT so that can very easily be done from the UK - just a few more VAT codes, although you would have to be careful about the currency aspects in your accounting system.  (Does your client, or you, have the expertise to handle this stuff too?)

Incidentally, if you set up an Irish company, you will have an annual filing regime that is broadly similar to that of Companies House. However, if annual returns are late, there can be severe consequences.  Late filing fees clock up on a daily basis and, worse, exemption from audit is lost, so you need to be careful about this.  

If you take on Irish employees, they will be covered by Irish legislation which is slightly different to that of the UK in relation to minimum wage, holidays, public holidays, minimum notice, redundancy, termination payments, unfair dismissal, sick pay and benefits, pensions etc.  Sometimes it can be worthwhile paying a local firm or payroll bureau who will be familiar with these areas and will give you guidance, ideally within a fixed payroll fee.  Ideally, the company HR person would learn this stuff, particularly if there are longer term plans.  There is lots of online information.  This is one http://www.citizensinformation.ie/en/employment/employment_rights_and_co...

Finally, if anyone is coming to set up in Ireland, make sure you don't refer to "Eire" or "Southern Ireland" or even "the Irish Republic", all of which get up people's noses.  Just "Ireland" will do.  (Of course, if you originally meant Northern Ireland, which is part of the UK, disregard all of the earlier comments - you don't need to do anything differently!)

 

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04th Mar 2016 08:49

Thanks Brend201. Met with the client yesterday and will probably set up a Company in Ireland. The 7.5% difference in tax is the main factor as profits likely to be >£500k by Year 2 as there will be repeating contracts.

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04th Mar 2016 09:10

In the circumstances you describe the company will be chargeable to UK corporation tax, not Irish corporation tax, so the 7.5% tax difference is moot. What makes them think they will be not be liable to UK corporation tax on the Irish profits if they set up an Irish company?

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04th Mar 2016 09:40

Plan is for it to be owned personally by the individual who owns the UK company.

Our understanding is that the dividends will be subject to UK income tax, but there'll be a bigger dividend post Irish Corp Tax.

We have researched this and run some sums, but happy for anyone to point out if we're missing something.

 

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By Matrix
04th Mar 2016 09:43

Management and control

Yes you are missing the fact that the profits will be chargeable to tax in the jurisdiction in which the company is managed and controlled.  This will only work if the decision makers move to Ireland.

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04th Mar 2016 11:01

As Matrix has said, you are completely missing the point. The country of incorporation is not relevant in this case.

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04th Mar 2016 18:21

Thanks Matrix and Tim. I'll take a look at the implications of this on the decision.

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05th Mar 2016 10:38

Norn Iron

Have you thought about setting up a company in Northern Ireland ?

The rate's going down to 12½% soon.  Much depends on where your work is, obviously.

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