18/05/2013 JF Harrington & Co Certified Public Accountants & Registered Auditors 090 6481906 email [email protected] Setting up as a Self Employed.

18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors

090 6481906 email [email protected]

Setting up as a Self Employed Person

Joe Harrington JF Harrington & Co Certified Public Accountants

18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors 090 6481906

email [email protected]

Introduction

The purpose of the Discussion is to explore the way in which a person can become registered as self employed with the Revenue and the Companies Office.

My name is Joe Harrington and I run a small accountancy practice at Main Street Moate Co. Westmeath. I have been doing that for the last 19 years

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Topics for Discussion Sole Trader V Limited Company Partnership Registering your Business

Revenue CRO

Accounting Records to Be Mainatained Audit Exemption for Limited Companies What Can I Claim Against My Tax Transferring from Sole Trader to Co Filing Obligations with Revenue & CRO Tax Rates & Bands



Topics for Discussion

PRSI & USC Rates Revenue Audit Consequences Implications of Employing Staff Retiring from The Business Appendices Questions & Answers



Sole Trader V Limited Company

Tax Issues Limited Liability To Have a Company you must have 2 people Getting Money out of Company Your Information is on Public File Additional Fees With Company



Sole Trader V Limited Company If a company commences trading there will be

no corporation tax for the first 3 years Corporation Tax is paid on Profits after Directors

Drawings at 12.5% In Sole Trader Situation the tax is on profits

before drawings 25% Corporation tax on Rental income &

Investment Income



Partnership

Very Similar to a Sole Trader You also need to have 2 people to set a partnership up You need to register the Partnership with the CRO and

Revenue as soon as possible You also should have a partnership agreement drawn

up as soon as possible and have it done by a solicitor



Registering Your Business

Sole Trader or Company you must register your business with the Revenue at the outset

In a sole trader situation you complete a form TR1 to register for all Taxes

The same Form is used for a partnership In a Limited company situation you complete a Form

TR2 to register for all taxes If a sole trader or partnership is trading or trades

under a business name you must




Register it with the CRO by a completing a Form RBN1 Limted Company you must register with the CRO Once you decide on a name and it is available nobody

else can use that name In a company you must have 2 people to set up. You can own 100% of the shares therefore a single

member company




With a Limited Company you complete a Form A1

The Memondum & Articles of Association will then be issued

Certifiacte of Incorporation Company Seal



Transferring from a Sole Trader to a Company

Most Common for a business after trading for a few years Possible Tax Implications for the sole trader If property involved normally a lease drawn up between

company and sole trader All other assets transferred at tax written down value and

set up in the companies accounts as a directors loan



What can I Claim Against Tax

Any expense wholly & exclusive necessary for your business

In a limited Company situation you can claim travel & subsistence based on civil service rates

You can only claim the above in the course of your duties and not from home

Sole Trader/Partnership do your claim based on invoices paid



What Can I Claim Against my Tax

Medical Expenses that you incur and they are allowed at 20%

Contributions to a Personal Pension are deductible but are restricted dependant on your age

In a company situation you can set up a executive pension which is much more generous to what you can put into it



What Can I Claim Against My Tax

Also it is a good way of getting money out of your company tax free

Tuition Fees paid to Third Level Colleges allowable at 20% up to a maximum of €2,500 for a full time course and €1,250 for a part time one

Contributions for PHI are deductible against tax



Accounting Records to be Maintained

Basic Records that need to be maintained are as follows: Cash Book/Sales Book Cheque Payments Book Purchases Listing Debtors/Creditors Ledger

Records can be maintained manually or on computer



Accounting Records to be Maintained

They can be maintained on excel spreadsheet Various Tailored Made Accounts Package

such as Sage Line 50 big red book etc Records must be maintained for a period of 6

years



Audit Exemption

A Significant Relief for Companies If you qualify you don’t have to get your

accounts audited by a independent auditor Significant saving on Fees To Qualify you have to satisfy the following

conditions: Turnover less than €8.8m



Audit Exemption

Balance Sheet less than €4.4m Less Than 50 people Employed Accounts & Filing Requirements up to date

Not available to Companies Limited by guarantee

Not Available to Group Companies



Filing Obligations with Revenue & CRO

As a sole trader or partnership no filing requirements with CRO

As a sole Trader you have to file your tax return by the 31st October each year

You must pay the balance ofyour tax for the current year and pay preliminary tax for the next year at that date also




With a Company you must file your CT1 with the revenue 8 months and 23 days after year end

Preliminary Tax due at the end of month 11 of your accounting period

Company Accounts and B1 has to be filed with CRO 9 months after year end




In a commencement situation the company has to file a B1 6 months after incorporartion

Vat Returns have to be filed every 2 months PAYE/PRSI returns every month



Tax Rates & Bands

Cut off Point The amount you can earn before you pay 41% tax

€32,800 for a Single Person €41,800 for a Married Couple With One

Income The €41,800 can be increased by a further

€23,800 if both are working



Tax Rates & Bands

Single Tax Credit €1,650 Married Tax Credit €3,300 PAYE Credit €1,650 Self Employed People Not Entitled to PAYE

Credit There is Marginal Releif and Single PAYE

Worker can earn €18,000 before pay Tax Married PAYE €36.000



Tax Credit & Bands

Self Employed these figures are halved 2 Tax Rates 20% & 41%



PRSI & USC Rates

Self Employed Pay an S Stamp which is 4% on their income less Capital Allowances

There is a minimum contribution of €500 if your income is more than €5,000

This stamp doesn’t entitle you to anything other than a contributory pension



PRSI & USC Rates

If Income less than €10,036 no USC payable 2% on the first €10,036 4% on the next €5,980 7% on Balance If you earn over €100,000 you pay 10% Calculated on Income less capital allowances



Revenue Audit & Consequences

When self employed you maybe subject to a revenue audit

Revenue come & Inspect your books and if not happy they will look for additional tax

As well as additional tax they will charged interest and penalties

Penalties can vary from 10% to 100% depending on the seriousness of the error



Revenue Audit & Consequences

If Settlement Exceeds €33,000 to include interest and penalties it will be published in the papers

Before audit commences if you make a voluntary disclosure you will save on penalties and non publication

If not happy with Revenue you can appeal their decision to appeal commissioner and circuit court etc.



Employing Staff

You must register as employer You will have to register each employee as

working for your company Liable to pay ER PRSI on their gross wages

which varies. Gross Wage up €356 is 4.25% and thereafter 10.75%

Pay them for All Public Holidays



Employing Staff

Pay them all their Holiday Entitlements Once they are more than 2 years working they are

covered by the unfair dismissal act Once they are with you 2 years they are entitled to

Redundancy which is now fully payable by employer; up to 2012 there was a rebate of 15% and prior to that it was 60%

Once you take on someone ensure that you get a Terms & Conditions Employment Contract signed asap



Retiring from the Business

Any Property or Goodwill will be liable for capital gains tax due at 33%

However if you are in business for 10 years and you are over 55 you can claim retirement relief up to the value of €750,000 between the age of 55 to 66 outside the family

This reduced to €500,000 for over 66 If you dispose or transfer to your family member there

is no limit on the amount provided between the age of 55 to 66 and the family member must work in the business for the previous 5 years



Retiring from Business

If you sell or transfer to family after 66 there is a limit set at €3,000,000



Appendices

TR1 Tax Registiration Form for Sole Trader TR2 Tax Registration for Company Flate Rates Expenses RBN1 to Register Business Name for Sole

Trader Form A1 to Incorporate Company Travel & Subsistence Tax Rates & Bands



Questions & Answers

Any Questions?

18/05/2013 JF Harrington & Co Certified Public Accountants & Registered Auditors 090 6481906 email [email protected] Setting up as a Self Employed.

Documents

public accountants

business sole trader

sole trader situation

limited company situation

business register

solicitor slide

limited companies

tax transferring