Independant Contractor

[twofly]

Hi

I need advice please. I am planning on consulting to my existing company as well as other clients. Whats the best option for me. I will have many clients and will be charging them a daily rate for IT Business consulting services.

I was planning on opening up a CC but then I would have to change all my income generating expenses to the companies name, is that correct. If I go as an independant contractor, would this be a better solution. I would also like to register for VAT as an independant contractor, is this possible.

Please send me feedback as I am so confused. Also, what type of expenses are allowed as deductions for paying PAYE.

[Dave A]

It really is a good idea to have your business and your personal lives as seperate legal entities. The only hiccup in saying "go for a cc" right now is that it seems cc's are on their way out.

[wynn]

Check with your accountant how much (80%) of your income may come from one source.
Otherwise you may lose tax claims.

[twofly]

I wont be getting 80% of my income from one client. I will have between 2 to 3 clients each month, I would say total for the Year would be about 40% from one client.

[Vincent]

It really is a good idea to have your business and your personal lives as seperate legal entities. The only hiccup in saying "go for a cc" right now is that it seems cc's are on their way out.

You can register a CC till 31-12-2009 - no new registrations after 1 Jan 2010
Existing CCs will remain in existence for 10 years after 1 Jan 2010, thereafter they will be replaced by a company with similar features.

[twofly]

Independant Contractor

Hi

I am an independant contractor and need to find out if I need a tax certificate or some sort of proof that I can give to a client so they do not deduct PAYE. I have a contract that has a clause that I am an independant contractor and that the company is not liable for any tax deductions or any issues relating to SARS. They said they need proof that I will be paying my own tax.

[Dave A]

Apply for a tax directive from SARS. If you are registered on eFiling, often times you can do it online there.

A tax clearance certificate might also go a long way to settling butterflies.

[Graeme]

IT Contractors watch out!

When I was working I noticed that all of our independent IT contractors worked as cc's - I gather that their main reason for doing so was in order to receive the protection of the "limited liability" feature of a cc. Back then if there was a hiccup in one of their programs and it cost us money, they could be sued for damages, and if not a cc, they were personaly liable for perhaps a huge amount of money.

That was a while back - has anything changed? Don't think so.

[duncan drennan]

They said they need proof that I will be paying my own tax.

Apply for a tax directive from SARS. If you are registered on eFiling, often times you can do it online there.

A tax clearance certificate might also go a long way to settling butterflies.

I don't think that SARS issues this type of tax directive any more. A tax clearance certificate, along with a letter from your accountant may help.

[Dave A]

I don't think that SARS issues this type of tax directive any more.

I was quietly wondering myself as I see SARS has gone down the route of a different form for each different type of tax directive. My theory was if I was wrong, someone would correct me

Thanks Duncan.

[Morticia]

Duncan is correct - no more tax directives/clearance for independant contractors. There's quite an extensive (albeit a bit old) Interpretation Note No. 17 issued by SARS.

A number of operational procedures have been put in place over the years to facilitate the process of considering the status of a labour broker. These are contained in Circular Minute No. 40 of 1992 (which included a brochure “Tax Guidance for Independent Contractors and Labour Brokers”), Circular Minute No. 40 of 1995 as well as a Minute addressed to SARS branch offices dated 8 April 1993. These documents were made available to SARS branch offices only (I will try to get my grubby paws on these dcuments and post here.)

[Dave A]

If the definitive guidelines aren't generally available, no wonder there is so much confusion on this. The issue of taxation on the earnings/payment to independant contractors seems to come up quite regularly.

I will try to get my grubby paws on these dcuments and post here.

You are a star!

[duncan drennan]

Have a look at this list of SARS' income tax interpretation notes. Interpretation Note 35 has to do with personal service companies, labour brokers and independent contractors.