Before we start show of hands, how many of you are already registered for income tax ? how many are trading as a Limited Company?
Discuss the pros and cons
Single €32,800 @ 20%, Balance @ 41% , Married with one person with income €41,800 @ 20%, Balance @ 41%Single Tax Credit €1650, Married €3,300, other tax credits
Marie DoodyTaxAssist Accountants 48 John Street Waterford
This is what I am going to talkaboutThis is what I am going to talk about Deciding on the correct legal structure Operating as a Sole Trader, Partnership or Limited Company Income Tax Registration VAT What are allowable business expenses What records do I need to keep Keeping on top of your book keeping.
Sole TraderAdvantages of operating as a Sole TraderNot required to file accounts which would be available forinspection by the public. Fewer legal formalities compared to other structures. The income from the business is personal income and expenses which are incurred "wholly and exclusively" in the course of the trade are allowable deductions. Closure of the business requires less formality.
Sole TraderDisadvantages The owner is personally liable for all debts of the business. Raising capital can be more difficult. The life of the business depends entirely on the owner.
Limited Company A limited company is a separate legal entity. The owners are shareholders and its directors make decisions on behalf of the company. As a separate entity it has sole responsibility for its debts. Its liabilities are limited to the paid-up share capital, therefore the company is said to have "limited liability". There are a number of exceptions to this, where company debts become personal debts.
Limited Company Advantages of a Limited Company Limited liability - in general, shareholders are only liable to lose the share capital they subscribe. Pension contributions can be made at the Companys expense. Raising finance can be less difficult. There can be many owners of the business.
Limited Company Disadvantages of a Limited Company Limited liability may be neutralised as lenders, in practice may seek personal guarantees. Legislative requirements may be costly and time consuming. The need to prepare and file accounts with the Companies Registration Office. There are surcharges on undistributed investment incomes.
Income Tax Vs PAYE Tax paid annually v tax deducted weekly or monthly Accounts required v no accounts required You’re responsible v employer responsible Class S PRSI v Class A PRSI (usually) No PAYE tax credit v PAYE tax credit €1,650 Less entitlements when cease self employment
Income Tax Who does this apply to? Deadlines Taxes due – IT, PRSI, USC Accounts and tax returns Rates Tax credit and reliefs Allowable expenses
Accounts Income & expenditure statement Sole trader financial statements Partnership financial statements Form 1 (partnership return) Form 11 (sole trader return)
Allowable Expenses ‘Wholly and exclusively’ test Reasonable expenses Pre – trading expenses Normal everyday expenses Capital expenses Personal expenses / drawings Not allowed
Penalties Late return Late payment Surcharge Restrictions Interest and penalties Publication in defaulters list
Corporation Tax Returns Who does this apply to? Deadlines Accounts and tax returns Annual company returns Rates Allowable expenses
Record Keeping Legal requirement Keep it simple Main records: Bank and credit card statements Cheque and lodgement books Sales and purchases invoices Cash expenses Legal agreements
Common Pitfalls Using the wrong business structure Not preparing a business plan Failing to register for tax(es) on time Failing to make returns on time Poor / no record keeping Not seeking advice
VAT Registration limits How does it work? Deadline and returns Rates Cash basis v invoice basis Deductible expenses Non deductible Bad debts
What is the turnover threshold for VAT registration? The principal thresholds applicable are as follows: (a) €37,500 in the case of persons supplying services, (b) €37,500 for persons supplying goods liable at the reduced or standard rates which they have manufactured or produced from zero rated materials, (c) €37,500 for persons making mail-order or distance sales into the State, (d) €41,000 for persons making intra-Community acquisitions, (e) €75,000 for persons supplying goods, (f) €75,000 for persons supplying both goods and services where 90% or more of the turnover is derived from supplies of goods (other than of the kind referred to at (b) above) and (g) A non-established person supplying taxable goods or services in the State is obliged to register and account for VAT irrespective of the level of turnover. A taxable person established in the State is not required to register for VAT if his or her turnover does not reach the appropriate threshold above. However, they may opt to register for VAT.
Recommendations Get registered! Know key filing dates File returns on time Get invoices for everything (receipts no good for VAT) Pay staff gross Use direct debits to pay Revenue If you are unsure get advice
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