Accounting for Irish Professional Contractors

Contractor Accountant Ireland

Choose the right structure, then keep every tax and filing obligation connected.

Umbrella, sole trader and personal limited company structures produce different tax, PRSI, expense and compliance outcomes. There is no universal day-rate threshold that makes one option right for every contractor. Forti compares the options using your contract, expected billings, working pattern and plans.

Get a free contractor structure review View pricing
Key figures at a glance
Structure review
Free
LTD accounting
From €195 + VAT/month
Payroll add-on
€30 + VAT/month
PSWT withholding rate
20%
Irish VAT threshold (services)
€42,500
Company formation
From €295 + VAT
Umbrella and complex work quoted after review
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Structures compared
Umbrella, sole trader, limited company
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Public sector
PSWT tracked and reconciled
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Cross-border
UK, EU and US VAT confirmed
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Based in
Sandyford, Dublin 18

This service is for you if

You are starting your first Irish contract and need to choose a structure
You are using an umbrella company and want the alternatives reviewed
You operate a personal limited company and need specialist monthly accounting
Your client is a government, health, local-authority or semi-state body that deducts PSWT
You work with UK, EU or US clients and need the VAT treatment confirmed
Your actual working arrangement may need review under the Karshan framework
You are switching accountant and want payroll, VAT, CT1 and CRO records reconciled

Umbrella, sole trader or limited company

The right answer depends on the full position — contract, billings, personal cash needs, expenses and plans. A limited company can create more options, but it also creates annual accounting costs and director responsibilities.

PAYE umbrella
Income Tax, USC and Class A PRSI through payroll
Administration
Low. The umbrella handles invoicing and payroll. You submit timesheets and approved expenses.
What you give up
No control of a separate company, no retained profit, no company year-end choice.
Suits: shorter contracts, first-time contractors and people who value simplicity.
Sole trader
Income Tax, USC and Class S PRSI through Form 11
Administration
Moderate. You keep business records, file Form 11 and remain personally liable for business debts.
What you give up
No limited liability, no company profit retention, no CT rate on business income.
Suits: independent contractors who do not need a company structure.
Most common for established contractors
Personal limited company
Corporation Tax on profits; salary, benefits and dividends taxed separately
Administration
Higher. Director duties, payroll, VAT, CT1, B1 and annual accounts all apply.
What you gain
Control of invoicing, profit retention inside the company, pension planning and company banking.
Suits: longer-term contractors who want company control, profit retention or company pension planning.
Ready to incorporate?
Review Forti's Irish company formation process and current resident-founder packages.
View Irish company formation →
Still comparing structures?
See the wider tax, liability and compliance differences between sole trader and limited company.
View sole trader vs limited company →

There is no universal contractor break-even point

Day rate matters, but it is not the only figure. A reliable comparison needs all of these.

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Expected annual billings
A high day rate with a short contract can produce a different result from a lower rate with stable, year-round work.
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Money needed personally
Corporation Tax applies inside the company. Salary and dividends are taxed separately when value is extracted.
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Contract length and gaps
Formation and annual compliance costs continue even where the contract ends earlier than planned.
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Expenses and equipment
Only genuine allowable costs count. A company does not turn private spending into a business deduction.
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Pension and future plans
Company pension contributions may be relevant, but they should fit the contractor's retirement plan and pension rules.
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Employment-status risk
A structure cannot override a working arrangement that is employment in substance. The facts must support the choice.

Employment status comes before tax planning

A contract cannot simply label someone self-employed. Revenue expects the engaging business to apply the Supreme Court's Karshan five-step framework to the facts of each working relationship.

1
Work for pay
Is work exchanged for wage or other remuneration?
2
Personal service
Must the worker perform the work personally?
3
Control
Does the business control what, how, when or where the work is done?
4
Overall reality
Are the facts consistent with employment?
5
Legislation
Does the relevant law change the conclusion?
Forti can review the tax and payroll implications of a working arrangement. Revenue, the Department of Social Protection and the courts remain responsible for formal status decisions.

Accounting under a PAYE umbrella

The umbrella employs you, invoices the agency or client, runs payroll and pays your net salary. Lower administration — but you do not control a separate company or retain profit inside one.

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PAYE and Class A PRSI
Income Tax, USC and employee PRSI are processed through the umbrella payroll. Your net salary is paid after these deductions.
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Employee expense rules apply
Tax-free reimbursement requires the expense to be incurred wholly, exclusively and necessarily in carrying out the employment duties — stricter than company rules.
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Lower administration
You normally submit timesheets and approved expenses rather than managing company accounts and CRO filings.
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Less control
You cannot retain company profit, choose the company's year-end or build a separate contracting company balance sheet.
Home-to-work travel is generally private travel. Umbrella expenses should be assessed under the employee rules rather than copied from a limited-company expense list.

Accounting for a personal limited company

A personal limited company gives you control of invoicing, business banking and the timing of company decisions. It also creates company-law, payroll, tax and bookkeeping duties.

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Company formation and tax registration
CRO incorporation, RBO, Corporation Tax, VAT and employer PAYE set up in the correct sequence before billing begins.
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Monthly bookkeeping
Client invoices, agency settlements, expenses, director balances and bank activity reconciled within the agreed timetable.
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Director payroll
Salary, PAYE, USC and the correct PRSI class processed through payroll and reported to Revenue each period.
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Corporation Tax and accounts
Annual financial statements and CT1 prepared from the reconciled records and filed through ROS.
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CRO Annual Return
Form B1 and the required financial statements coordinated with the company year-end and filing deadline.
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Salary, dividends and pensions
Payments reviewed against distributable reserves, payroll rules, personal tax position and pension advice where relevant.

Director PRSI depends on shareholding

A director who owns or controls 50% or more of the company is classified as self-employed for PRSI and pays Class S. The position below 50% is not decided by one automatic rule.

50% or more — Class S
Automatic Class S treatment for a working proprietary director. Employer Class A PRSI is not charged on that director's salary.
Below 50% — assessed from facts
PRSI class is assessed from the facts and the person's relationship with the company. Not determined by a single percentage rule.
Payroll still applies in all cases
Director salary remains reportable through PAYE payroll even where PRSI is Class S. Payroll cannot be skipped.
View Forti payroll and HR services →

Professional Services Withholding Tax

PSWT is a 20% withholding tax deducted by accountable persons — government departments, local authorities, the HSE, authorised health insurers and many state or semi-state bodies — from payments for certain professional services.

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It is a tax credit, not a second tax
The amount withheld is credited against the contractor's Income Tax or Corporation Tax liability for the relevant period. You are not taxed twice.
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Tracked through ePSWT
The accountable person creates a Payment Notification in ROS and deducts the tax before paying the contractor. The record is matched when the return is filed.
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Interim refunds can be available
A contractor can apply using Form F50A through MyEnquiries where Revenue's conditions are met, including where a business has recently started.
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Does not count as preliminary tax
PSWT credits cannot simply be treated as the preliminary-tax payment for the same year. Separate preliminary-tax obligations still apply.
PSWT is not Relevant Contracts Tax. RCT is a different withholding system used for relevant contracts in construction, forestry and meat processing. A contractor can encounter one system, the other, or neither — depending on the work and the client.

VAT for Irish and cross-border contracts

The main Irish VAT registration threshold for services is €42,500. The threshold is not the only test — cross-border services, overseas clients and non-Irish establishments can create separate obligations.

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Irish business clients
Irish VAT normally applies to taxable Irish services once registration is required or voluntarily chosen.
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EU business clients
The reverse charge can apply to qualifying B2B services. The invoice format and VIES reporting position must be correct.
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UK and other non-EU clients
Many B2B services can fall outside Irish VAT, but place-of-supply rules and client-status evidence still need to be confirmed.
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Voluntary registration
A contractor below the threshold can apply to register voluntarily, but registration brings VAT return filing and record-keeping duties.

Contractor expenses need evidence and business purpose

The structure changes the legal test, but it does not remove the need for a genuine business purpose. Private spending remains private regardless of the company structure.

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Equipment and software
Laptops, monitors, software and professional tools can be deductible where bought for the trade, with private use addressed separately.
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Training and subscriptions
The course or subscription should maintain or develop skills used in the existing contracting activity — not general interest.
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Travel and subsistence
Ordinary commuting is generally private. Business travel needs the destination, purpose and supporting records retained.
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Home working
A reasonable business portion can be considered under the applicable company or employee rules, with the basis documented.
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Phone and broadband
Only the business element is deductible or reimbursable where private use also exists. A mixed-use split must be supportable.
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Pension contributions
Company pension funding can be relevant, but contributions should follow pension and employment rules — not just the available cash.

Close company surcharges can affect contractor companies

Most owner-managed contractor companies are close companies. The surcharge should be reviewed before profits are left in the company for long periods.

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Professional service company surcharge — 15%
A 15% surcharge can apply to one half of undistributed trading income in a close service company, subject to the statutory calculation and the distribution period.
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Investment and rental income surcharge — 20%
A 20% surcharge can apply to undistributed after-tax investment and estate income of a close company, regardless of the main trading activity.
The outcome depends on the company's activity, distributions and timing. The close-company surcharge should not be dismissed simply because the company earns contractor income.

How Forti supports your contract

From the initial structure review through to year-end compliance — and revisited when your circumstances change.

1
Free structure review
We compare umbrella, sole trader and limited company using the contract, billings, expenses, working pattern and plans — before you commit to any structure.
2
Set-up or accountant transfer
Where a company is chosen, Forti coordinates formation, Revenue registration and the transfer of records from any previous provider. We handle the sequence so nothing is missed.
3
Monthly accounting
Invoices, bank activity, expenses, VAT, PSWT credits and director payroll are processed within the agreed timetable each month.
4
Year-end compliance
Annual accounts, CT1, CRO Annual Return and any contractor-specific issues — close-company surcharge, PSWT reconciliation, expense review — are handled together.
5
Structure reviewed again
The recommendation is revisited when the day rate, contract duration, client type or personal plans change. The right structure at year one may not be right at year three.

What is included for a limited-company contractor

Cloud accounting software and bank-feed set-up
Monthly bookkeeping within the selected plan limits
Director payroll and PRSI review where included or added
VAT tracking and VAT returns where registered
PSWT credit reconciliation for public-sector contracts
Annual financial statements and Corporation Tax return
CRO Annual Return coordination
Contractor expense and close-company surcharge review
Support with Revenue and CRO queries within the agreed engagement

Contractor accounting pricing

The structure review is always free. Ongoing accounting follows the LTD plans for limited-company contractors. Umbrella and complex work is confirmed after review.

Always free
Structure review
Umbrella, sole trader and limited company compared before you commit.
Free
No obligation
  • Contract and billing analysis
  • Expense and PRSI comparison
  • Employment-status discussion
  • Clear recommendation with reasons
Book a review
Most popular
LTD Starter
Bookkeeping, annual accounts, CT1, B1 and VAT support within plan limits.
From €195
+ VAT per month
  • Monthly bookkeeping
  • Annual financial statements
  • CT1 filing through ROS
  • CRO Annual Return (B1)
  • VAT returns
  • PSWT credit reconciliation
View plan details
Payroll add-on
Per employee or director processed through Forti payroll each month.
€30
+ VAT per person per month
  • Director or employee payslips
  • PAYE and USC calculated
  • PRSI class review included
  • Revenue payroll submissions
Add to plan
Umbrella or complex work
Based on contract, insurance, payroll, PSWT and cross-border requirements.
Exact quote
After scope review
  • Umbrella comparison and support
  • Multi-client or cross-border VAT
  • Public-sector PSWT work
  • RCT and specialist filing
Get a quote

Irish company formation from €295 + VAT where a limited company is the chosen route. All fees exclude VAT at 23%.

Common contractor accounting mistakes

Choosing a structure from the headline tax rate
The comparison must include personal extraction, PRSI, expenses and annual compliance costs — not just the CT or Income Tax rate.
Using a fixed day-rate threshold
Billable days, contract length and personal cash needs can change the result. No universal threshold applies to every contractor.
Assuming the contract label decides status
Karshan requires the real working relationship to be assessed — not just the title on the agreement.
Treating PSWT as an additional final tax
It is normally a credit. But it creates cash-flow and reconciliation work that must be managed through the accounting process.
Treating PSWT as preliminary tax
The withholding credit cannot simply replace the required preliminary-tax payment. Separate preliminary-tax obligations still apply.
Applying the wrong PRSI class to a director
The 50% rule is automatic only at or above that shareholding. Other cases require a separate assessment of the facts.
Ignoring the close-company surcharge
A service-company or investment-income surcharge can arise where profits remain undistributed for too long.
Using the Irish VAT threshold for every client
Cross-border services can follow place-of-supply and reverse-charge rules that apply before or without exceeding the €42,500 threshold.

Related Forti services

Company registration
Form the Irish company and set the first compliance dates.
View company registration →
Limited company accounting
Monthly bookkeeping and annual company filings under one plan.
View company accounting →
Sole trader accounting
Bookkeeping, VAT and Form 11 support where a company is not required.
View sole trader accounting →
Payroll and HR
Director and employee payroll, Revenue reporting and payslips.
View payroll services →
Annual compliance
Financial statements, CT1 and CRO Annual Return coordination.
View annual compliance →
Sole trader vs limited company
Full tax, liability and compliance comparison between the two main structures.
Read the comparison →

Common questions from contractors

Should I use an umbrella or limited company?
It depends on the contract, expected annual billings, personal cash needs, administration and employment-status position. Forti models the options before recommending a structure — the review is free.
Is there a minimum day rate for a limited company?
No statutory or universal threshold exists. A higher rate can support the economics, but billable days, contract length and annual company costs also matter.
Can I work as a sole trader instead?
Yes, where the engagement is genuinely self-employed and the client accepts the structure. You file Form 11 and pay Income Tax, USC and Class S PRSI on the business profit.
What is the Karshan test?
The five-step framework used to decide whether a worker is an employee or self-employed for tax. It considers pay, personal service, control, the overall facts and the relevant legislation.
What is PSWT?
Professional Services Withholding Tax — a 20% deduction made by accountable public and semi-state bodies from payments for certain professional services. It is a tax credit, not an additional tax.
Can I get an interim PSWT refund?
Possibly. Revenue accepts Form F50A applications through MyEnquiries where the conditions are met, including for some recently started businesses.
Is PSWT the same as RCT?
No. RCT is a separate withholding system for relevant contracts in construction, forestry and meat processing.
Do I pay employer PRSI on my director salary?
A director who owns or controls 50% or more of the company is Class S, so employer Class A PRSI is not charged on that salary. Below 50%, the position is assessed separately from the facts.
Do contractors need VAT registration?
The main Irish threshold for services is €42,500. Cross-border purchases or services provided to overseas clients can create different obligations before or without exceeding that threshold.
Does the close-company surcharge affect contractors?
It can. A professional service company may face a 15% surcharge on one half of undistributed trading income, and a 20% surcharge can apply to undistributed investment or rental income.
Can Forti help me switch from umbrella to limited company?
Yes. Forti can compare the structures, form the company, register the taxes and set up bookkeeping and payroll. The final timing depends on the documents, CRO and Revenue processing.
How much does contractor accounting cost?
Forti's LTD Starter accounting plan begins at €195 + VAT per month. Payroll is €30 + VAT per person per month. Umbrella or complex contractor work is quoted after reviewing the contract and scope.

Use the structure that fits the contract

The best contractor structure is the one that matches the real working arrangement and the numbers. Forti gives you the comparison first, then manages the accounting route you choose.

Get a free contractor structure review