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Tax Tips
The document provides information about filing taxes in Ireland, including deadlines, penalties, and tips to reduce tax bills. Some key points: - The deadline for paper tax returns is October 31st and the deadline for online returns is November 15th. Filing late can result in penalties of 5-10% of the total tax liability. - Individuals must file if they are self-employed, have rental income, investment income, shares/options, or other non-PAYE income. - Taxpayers can reduce their bills by claiming all eligible tax credits, contributing to a pension, splitting income with a spouse, carrying losses forward, and considering setting up a limited company. - Tax
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Tax Tips
- 2. Agenda • Do I have to file? • When do I file? • What are the penalties? • How can I reduce my tax bill? • Rental property issues • Who are TaxAssist Accountants?
- 3. Do I haveto file? Yes if you are… •Self employed •Director and you own more than 15% shareholding in a company •Have rental income
- 4. Do I haveto file cont.… Yes if you have… •Investment income •Shares or share options •Other non PAYE income
- 5. Deadlines • 31st October2012- Paper Filing • 15th November- Online Filing Filing on time is crucial!
- 6. Compulsory online filing •New scheme introduced by Revenue- will have impact on anyone doing their own return • Applies to anyone claiming tax relief such as: • Pension contributions • Covenants • Maintenance payments
- 7. What is dueon October 31st? • Tax return- form 11 or form 12 • CGT return if applicable • Tax Liability- cheque, credit card, online bank transfer • Preliminary tax for 2012
- 8. What is preliminarytax? • Advanced payment of your 2012 liability • Can be calculated using 3 methods. 2 most common – 100% of 2011 liability – 90% of 2012 Not paying opens you to late payment interest
- 9. Penalties for filinglate • 5% surcharge of tax liability for the year • More than 2 months late increased to 10%. Example: 3 months late, tax liability for the year was €15,000 paid through the PAYE system. A surcharge of €1,500 would be payable.
- 10. Tax Tips: Claimall your credits Tax credits people tend to forget •Health- 20% of expenses. Remember to claim for your family •Home carers credit- €810 •Nursing home costs •Convenant
- 11. Tax planning • Contributeto a pension scheme • Split income with your spouse • Claim trading losses against other income • Consider setting up a limited company
- 12. Pension Limits • The maximum pension contribution, in any one year, for which you are entitled to tax relief, is related to your age and is expressed as a percentage of your gross income. Age % of Net Relevant Earnings Under 30 years 15% 30 – 39 years 20% 40 - 49 years 25% 50 - 54 years 30% 55 – 59 years 35% 60 years and over 40%
- 13. Split Income WithYour Spouse • Partnership- PRSI Class S • No entitlement to Social Welfare • Credits for State Pension • Sole Trader – employ spouse – PRSI Class M- Not entitled to Social Welfare or state pension • Company – Where spouse has <15% • PRSI Class A, full social welfare entitlement • (€65,600 @ 20% as opposed to €41,400 @20% if only one spouse is earning an income)
- 14. Income Tax LossRelief ( Sole Trader /Partnerships) • A tax adjusted loss can be claimed against other income in the year it arises. Section 381 Relief • If it is not claimed or excess loss- carried forward against future profits for same trade • Optional Relief , 2 years to claim • Loss can be increased by Capital Allowances
- 15. Consider Setting UpA Limited Company • Advantages: • Profitability: incorporation makes sense from a tax perspective if your level of drawings/salary are less than profits earned. • Reinvestment: Any profits not utilised by way of salary can be taxed at 12.5% and then left in the company for reinvestment purposes. This is possible when operating as a sole trader however all profits will be taxed at 41% plus PRSI and USC and thus reducing the amount of funds available for reinvestment. • Taxation: The corporation tax rate is currently 12.5% compared to a marginal income tax rate of 41%, PRSI of 4% and up to 7% USC on earnings.
- 16. Limited Company Continued • Limited liability: incorporation of a business provides limited liability. In the event of a claim against the company, in most circumstances you will not be held personally liable for the debt. • Pension funding: A company can get a deduction for contributions made on your behalf to a pension scheme. • Employees: There are no restrictions on employing your spouse who will have their own tax allowance and PRSI limits. Therefore the maximum married tax bands can be utilised (€65,600 @ 20% as opposed to €41,400 @20% if only one spouse is earning an income)
- 17. Companies Continued • Mileage: Current civil service mileage rates can be claimed if using a privately owned motor vehicle for business use. • Start-up companies: companies which are incorporated and commence trading after April 2009 and whose business is not the provision of services (i.e. accountants, solicitors etc) get a three year exemption which can reduce the company's corporation charge to Nil. In practical terms the company can earn profits of €320,000 before corporation tax is payable. Max saving @ 12.5% is €40,000. • Insurance: the directors are also covered by the company's public and employer liability insurance.
- 18. Limited Company- Disadvantages • Low level of profits: If profits levels remain at a low level, the benefits to be gained from incorporation are lost • BIK: Benefit in kind tax is extremely expensive from a personal taxation perspective if the company purchases assets which are used by the directors e.g motor vehicles. • Premises purchase: A company is from a tax perspective an unattractive vehicle to use to purchase premises for the company to trade from. If there is a gain on disposal the profit will be subject to tax on the gain within the company and the shareholders will pay income tax on funds extracted from the company following the sale.
- 19. Companies Disadvantages Continued • Directors' loans: Directors are prohibited from taking loans or having the company guarantee liabilities on their behalf. This is prohibited by Section 31, Companies Act, 1990. • Administration costs: The costs of incorporation, annual accounts preparation and filing fees must be met. There is also a loss of confidentiality as the company's accounts can be viewed by anybody in the Companies Registration Office.
- 20. Rental Property • Upto € 10,000 relief from room in your own house • Capital allowances on furnishings- don’t forget • Interest relief- 75% of interest only not capital • Must be registered with PRTB to claim interest relief
- 21. Difficulty paying tax •File your return anyway • Contact Revenue Commissioners • Agree installment arrangement- Be realistic
- 22. Who are TaxAssist Accountants?
- 23. Who are TaxAssistAccountants? • We are Ireland’s leading accountancy network with over 20 branches across Ireland • We specialise in helping Small Businesses and as a network are servicing close to 3,000 clients • We offer clients Fixed Fees – no hidden costs, so you know what you are paying in advance • Our Fees include all correspondence and free business advice to clients
- 24. • We focusonly on the SME sector • Friendly and approachable • Fixed fees agreed in advance • Prompt completion of accounts and returns • Tailored service • No jargon • Regular and flexible appointments
- 25. Our core services: •Business accountancy • Tax returns and advice • Bookkeeping services • Payroll • Business plans and financial projections • Company formation
- 26. Thanks for listening Questions?