The Role of The Accountant in Start Up Technology Companies

Are you having difficulty in bridging the gap between being an Employee in the Tech sector and being self Employed?


Over the last number of years ,we have established an expertise in assisting “ Start Up Innovative Tech Companies “


Many of the Companies and it’s stakeholders are very similar in their Tech Skills and also their Business skills.


Typically, the Stakeholders in Start up Tech Companies are:

  • Experts in the Technology
  • Previously worked as Paye workers
  • Have very basic knowledge of running a business
  • Have minimal knowledge of Optimal Business structure
  • Have minimal knowledge of Taxation rules
  • Have minimal knowledge of Company Law
  • Have a basic knowledge of budgets and their preparation and implementation
  • Do not know how to claim grants that may be available
  • Do not know how to prepare a business plan, in particular the Financials of the plan

 

The above list is not exhaustive but is representative of the problems encountered by start up companies in the Technology Sector.

The Role of William Halpin & CO

Typically, we will engage in a consultation process with the Stakeholders. We will ascertain their requirements and then Design a “ Bespoke” Financial Plan which will assist the Company. We can assist in the following areas which are critical for Start up Companies
  • Business Structure: Sole Trader or Limited Company
  • Raise awareness of Company Law compliance issues ( CRO Submissions)
  • Taxation issues in respect of Business Structure : Income Tax, Corporation Tax
  • Bi Monthly VAT Returns, Monthly Paye / Prsi Returns
  • Assist with preparation of Budgets
  • Prepare detailed Management Accounts
  • Provide analysis of Monthly costs under each heading
  • Provide reports to Investors
  • Track Individual Project Costs
  • Track Research & Development Costs
  • Lead the Audit function if the Company is subject to a Statutory Audit each year. This involves liaising directly with the Auditors and their requests, thus ensuring that the Audit is completed in a timely & efficient manner

We can help new Start up Companies by allowing them to concentrate on their Business and not get tied up in Financials.

 

From our experience, this approach works.

 

William Halpin FCPA

William Halpin & Co.

ARE YOU SURE THAT YOU ARE SELF EMPLOYED ?

Revenue issued E Brief 129/22 last week, Code Of Practice to determine Employment Status of workers


It clearly sets out the various tests and criteria for determining the correct status.


It clearly sets out the criteria that establishes whether the relationship between an individual worker and the end user is a “ Contract of Service “( Employment) or a Contract for service (Self employment) arrangement


I do not intend to go through all the various sections but I think that Section 9.3.3 is really important and may be a real issue for many companies.


The E brief highlights 2 types of Companies


 1. Personal Service Company ( PSC)


2. Managed Service Company (MSC)


Personal Service Company


 Under this arrangement a contract for services is not explicitly agreed between the individual worker and the end user availing of these services, but is instead agreed between the end user and an intermediate company owned/directed by the worker.


Typically, a PSC company has a sole director who is the worker/contractor who owns most or all the shares of the company


Managed Service Company


 This type company is a variation of the MSC. It involves setting up a company who may or may not be involved in delivering similar services to the same end user. The MSC is typically facilitated by a third party agent who organises the legal and administrative affairs of the company.


Generally the individual workers shareholdings are below 50% (Unlike PSC Companies).


Section 9.3.3


In many cases the owner/Director or Worker Shareholder in either a PSC or MSC is genuinely Self Employed.
However in some cases after reviewing the terms and conditions of the arrangement , a contract of Service will be understood to exist ( ie employment)
Also, in some cases of genuine self employment, a level of dependency can develop between the worker and end user over a period of time, so the relationship may evolve into an employer/employee relationship.


There is an element here of The DSP “ Breaching The Corporate Veil”. This is a apparent new departure for DSP.


For the moment Revenue have not ventured into this area, but it may be a precursor for future investigation by revenue.


Consequences of Change of status from Self employment to Employed


 An end user, found by The Department of Social Protection will be required, for PRSI purposes , to treat the worker as a Direct Employee at the A1 rate, instead of the S1 rate.


When a determination has been made by DSP, the employer will be required to pay the relevant PRSI contributions for the employee for the full period in question and may be subject to a range of penalties under the Social Welfare Act 2005.


Potential PRSI Liabilities due to misclassification


 In a case brought by Department of Social Protection against RTE it was determined that some workers were incorrectly classified as Self employed.
In reply to a Parliamentary question raised by Catherine Murphy TD, on 1 March 2022, the Minister for Social Protection stated “ There is no statutory limitation restricting the number of years The Department can assess a PRSI liability against an employer who has misclassified their worker”


The Statute of Limitations for Revenue matters is 4 years !


Hence, all “ End users” should carefully review their existing arrangements with workers and confirm that their status is correct


Remember


 TAXRETURNSIRELAND.IE will help your business to grow by allowing you to concentrate on business development.


 For any Queries relating Accounting or Taxation contact Info@taxreturnsireland.ie


The contents of this article are not intended to amount to advice and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents. William Halpin & Co. disclaim all liability and responsibility arising from any reliance placed on any of the contents of this article.

Rent a Chair (self-employed) or Employee Status – Which is best for your Business?

hairdresser 550_400

A developing trend in The UK and Europe for Thousands of hairdressers and Barbers is to rent a chair in their salon.

As a salon owner should you take the rent-a-chair route?

The Hairdressing Federation has highlighted this as a very common occurrence faced by all hairdressing salons from start-ups to established businesses in Ireland. 

Benefits of chair rental

At a quick glance, the clear financial savings and freedom from employment law restrictions seem enticing for both for you as owner and the freelancer. But as with most things there is no one easy answer. There are pros and cons to both business approaches.

It’s your hair salon yet the chair renter is running their own business within it. This may lead to a perceived dilution of your role as Salon proprietor.

What’s more, if you plump for the chair or booth rental business model, it can be very hard to revert to an employee-only hair salon at a later date if you discover you’ve made an expensive mistake. However, there are also advantages !

What about “The One Stop Shop”      

Here’s a possible scenario:

It’s a typical Saturday. 11AM Appointment. Hairdresser Appointment for Mother. Make Up artist appointment for Sister. Nail Bar Appointment for Daughter. All done under the 1 roof.

No multi locations leading to possible parking difficulties and undue stress for clients.

In this blog post we will highlight the following issues:

  • What and how to charge your chair renter.
  • The major benefits to owners of using the rent-a-chair model.
  • Why you must have a rent-a-chair or booth rental agreement in place.
  • The self employment essentials you can’t afford to ignore.
  • Avoiding the pitfalls and making it work for you.

First, let’s look at the different ways to set up a hairdresser’s rent-a-chair or booth renting arrangement:

What’s the appropriate rent for your salon chair or booth rental?

These are three main methods:

  1. Charge a fixed weekly/monthly rent to the renter. Take a percentage of the chair’s takings rather than charge a fixed rent. You just receive a cut of the renters takings. This will be agreed between the parties and ideally should be subject to a legal contract being drawn up. This may be on a 50%/50% basis.This method can only work if there is trust between the parties. Such a simple thing as having a Receptionist dealing with all income may solve any potential problems. Also, it is critical to have a modern Digital Cash Register that will give daily, computerised reports. You also need to trust the freelancer implicitly. This is the most straightforward way, which can work well for both parties. You know what income you’ll receive each month and the freelancer knows exactly what expenses they have to find. The disadvantage of this method is the “ Looking over the shoulder syndrome “ i.e. The Renter has more business, probably making more money  than the person who owns the business.
  2. Take a percentage of the chair’s takings rather than charge a fixed rent. You just receive a cut of the renters takings. This will be agreed between the parties and ideally should be subject to a legal contract being drawn up. This may be on a 50%/50% basis. This method can only work if there is trust between the parties. Such a simple thing as having a Receptionist dealing with all income may solve any potential problems. Also, it is critical to have a modern Digital Cash Register that will give daily, computerised reports. You also need to trust the freelancer implicitly.
  3. A combination of the two. I think this works best for the salon owner. You charge a lesser fixed sum (but you still have some guaranteed income) plus you take a cut of the hairdresser’s takings. It can be like winning the jackpot.The downside?

It can cause resentment as the freelancer can feel you, the salon owner, are having your cake and eating it.

Why choose the rent-a-chair business model for your salon?

You can:

  • Save money
  • No Wages to be paid
  • No holiday pay/sick pay
  • No employer PRSI cONTRIBUTIONS (8.5%-10.75%
  • No pension contributions
  • No employee contract

A rent-a-chair hairdresser can:

  • Not bother to turn up after a heavy night.
  • Decide to knock off early and go home.
  • Decide which services and products they offer.
  • Worse: they can poach and walk off with your salon clients.
  • Worse still: they can persuade your staff to come and work with them in another salon and bring their clients.

The answer to this potential business nightmare?

Have a Service Contract between the two of you setting out the rules of the game. This way you’re both protected and know where you stand.

Rent-a-chair service contracts for hairdressers

Thousands of hairdressers manage to make rent-a-chair work for them successfully. You just need to be aware of the pitfalls and take legal advice before, not after, taking this route. Don’t put your business in jeopardy.

Always go to your lawyer or get in touch with a body like the NHF (UK salons only) who offer proven contracts specifically for rent-a-chair. Yes, it will cost money to consult a lawyer, but not as much money, heartache and hassle as sorting the mess out if it all ends in tears.

Is the hair stylist / Nail Bar Technician/ Make up artist really self-employed?

Look at the following Link to Irish Revenue clearly setting out the rules whether a person is employed or self employed.

https://www.revenue.ie/en/employing-people/becoming-an-employer-and-ongoing-obligations/guide-to-pay-as-you-earn-paye/determining-the-employment-status-of-an-individual.aspx 

YOU may be surprised ! Be really careful. If you are satisfied that this is a self employment status you really need to look at all the scernarios, that may arise, both good and bad. You need to then incorporate these into a service contract between yourself and the person renting the Chair.

Then you should contact your solicitor to draw up a service contract. You might consider some of the following points

  • Length of the Service Contract. ?
  • What happens at end of contract, Any Goodwill
  • What are rules in event of dipute or non compliance with terms of contract.
  • When they will work in your salon. Do you want to open up on a Sunday just for them?
  • What is policy if Salon Closed, is it open for Renter?
  • All client payments through central Cash Register
  • They must have separate Insurance in place
  • Who provides the hair products and equipment ?
  • Have they access to salon employees. If so there must be an additional % payable to salon
  • They may have use of Receptionist
  • Charges for cleaning, heating, laundry etc.

Some potential drawbacks for salon owners

  1. They are running their OWN business alongside your business. It may only be a chair but they are Self employed and they, like you want the best for their business ie Maximise Income and Minimise Costs. The person renting the chair is your competitor. Protect your Brand. Protect your Customer Base. The Nail Bar technician may offer an additional service to a client. This client may reduce their spend on their Hair , thus reducing your income. This may be happening under your watch. Be vigilant.
  2. Loss of Staff. Having a chair renter may cause animosity in your team. Some staff may also want to go self employed and this may lead to a loss of client revenue.
  3. Brand Dilution of your salon brand: Is it the Renters Salon or the Proprietors Salon ?

How to reduce the risks of rent-a-chair

If you decide to go down the hairdresser chair or booth rental route here are some sensible business precautions you can take to reduce your exposure:

  • As you would with employees, set up a rigorous selection process. Verify references, have a couple of interviews and a trade test. Involve other team members especially if they are self-employed too.
  • If they are currently working elsewhere how about a mystery shop?
  • Do have that Service Contract I talked about earlier. It’s essential.
  • Have a probation period of 2 or 3 months. If it isn’t working you can part company easily.
  • Weigh up the pros and cons

If you’re a start-up salon with a tight budget and a small client base but don’t want the risk of employing someone, then renting a chair out is it’s a great way of getting a passive income for your hair salon and getting a contribution to your overheads. If you want to introduce a new service, like hair extensions, but can’t afford to employ a specialist then a freelancer may be an entry route.

The flip side is that if they are very successful then their earnings can be substantial and this could have been your profit if you’d taken the employee route.

WHAT CAN TAXRETURNSIRELAND.IE DO FOR YOU ?

We will discuss in detail the Pro’s & Con’s of your situation. We will advise you on the Optimal working relationship and assist you in setting up the most appropriate internal and financial controls. We will take control of your Accounting and Taxation requirements, allowing you to concentrate on developing your business.

Amongst the services we offer are

  • Monthly VAT Returns
  • Monthly management Accounts
  • Weekly PAYE Returns
  • Weekly Staff Payslips
  • Staff Contracts of Employment
  • Annual Accounts
  • Company Secretarial
  • Tax Planning

TAXRETURNSIRELAND.IE will help your business to grow by allowing you to concentrate on business development.

For any Queries relating Accounting or Taxation contact Info@taxreturnsireland.ie

The contents of this article are not intended to amount to advice and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents. William Halpin & Co. disclaim all liability and responsibility arising from any reliance placed on any of the contents of this article.

Working From Home & Tax

working from home tax

Revenue has issued guidance on the tax treatment of e-workers and remote workers.

eWorking:

eWorking is where an employee works:

  • at home on a full or part-time basis
  • part of the time at home and the remainder in the normal place of work
  • while on the move, with visits to the normal place of work.

eWorking involves:

  • working for substantial periods outside the normal place of work
  • logging onto a work computer remotely
  • sending and receiving email, data or files remotely
  • developing ideas, products and services remotely.

Home expenses payment:

You can make a payment of €3.20 per workday to an eWorker employee without deducting:

  • Pay As You Earn (PAYE)
  • Pay Related Social Insurance (PRSI)
  • Universal Social Charge (USC).

This payment is to cover expenses such as heating and electricity costs.

If your employee’s costs are higher and you repay these expenses, records of the payments made must retained by you.

Your employees may instead choose to make a claim online at the end of the tax year. To do this, they must submit receipts to their local Revenue office using MyEnquiries which is available through MyAccount.

These arrangements only apply to eWorker employees. They do not apply to staff who bring work home outside of normal working hours.