Farm Ireland

Saturday 24 February 2018

What you need to know when setting up a limited company

Some of the issues to be aware of when setting up a limited company include:

  • When you start to trade through a limited company, your sole trader activity ceases. This causes a possible upward revision of tax for the year immediately preceding the year of cessation for farmers who make up their annual accounts to a date other than December 31. A revision will be required if profits are rising year on year. Careful tax planning is required in order to quantify this before you cease so that you won't be left with an unexpected tax bill.
  • If you are an employee of a company you will pay your tax through the PAYE system. This means that each month the company will pay your income tax, PRSI and USC. In other words, this is a monthly task as opposed to the once-a-year returns that sole traders must comply with every October.

Vat and registeration

  • There is an exemption from VAT when you transfer all or part of your business assets to a company, so this should not be an issue.
  • The new company must be formed and registered with the companies' registration office, open a new bank account and register for taxes with the Revenue. This may take a number of weeks, so careful planning is required.
  • Investment and rental income are also important. If these are received through a company, the net income from these will be taxed at 25pc as opposed to 12.5pc. However, this income will also be liable to a surcharge if it is not paid out to shareholders by way of dividend within 18 months of the end of the accounting year.


  • The decision to incorporate should have no impact on retirement relief on capital gains tax. The period of operation through a sole trader before transferring to a limited company will be taken into consideration in determining whether the relief will be available. If the land is retained outside the company but used in the trading activity of the company, it will also qualify for retirement relief.

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