Bookkeeping Advice from SR Accounting

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Category: Business and Enterprise in Wexford
Published on Thursday, 22 October 2009 18:05
Written by Administrator
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 STARTING IN BUSINESS – PART 3

I would like to take this opportunity to wish all those in business or about to open a business a Very Happy Christmas and a Prosperous New Year.  

We covered Value Added Tax in Part 2, so now to PAYE/PRSI:

General Information:

The tax year for PAYE/PRSI is the same as the calendar year, starting 1st January and finishing 31st December.  
You can run a Weekly, Fortnightly or Monthly payroll and this must be decided at the beginning of the year.  

Tax Credits and Standard Cut Off Point Certificate:

This certificate outlines the employee’s tax credits and standard rate cut-off point.  Both allowances are shown with an annual, monthly and weekly rate.  
The rate applicable will depend on whether the employee is paid weekly or monthly.  
The employee and employer will both receive a copy of this certificate at the beginning of every year.  
The employee’s copy is a detailed copy of the tax credits.  
It is the employee’s responsibility to ensure that the tax credits are correct.  
The certificate received by the employer merely gives the total amount of tax credit and standard rate cut-off.

Definitions:

Tax credit.                  A credit against your final tax bill.
Standard Rate Cut-Off Point.      Earnings up to this point are taxed at the lower rate of tax.  Earnings above this point are taxed at the higher rate of tax.  
Gross Pay.                      Earnings prior to tax.
Net Pay                          Earnings after tax.
Lower tax rate                 20 %            
Higher tax rate                41%.

Pay As You Earn System (PAYE)

This is a simple example to show the basis principles behind the PAYE system.  

Gross Pay                          €300.00
Tax Credit                         €30.00
Standard Rate Cut Off        €250.00

Calculation:

Gross Pay                         €300.00

€250 @ 20%                       €50.00
(€300 - €250) @ 41%          €20.50
                                        €70.50

Tax Credit                         €30.00
Tax Deductible                  €40.50

Cumulative System

The previous example is very straight forward, but the PAYE system can be quite complex because PAYE is calculated on a cumulative basis.  

I hope you found the above information useful.  Our next article will look at PAYE in more detail and cover PRSI.  Should you have any queries or feedback please contact me via our email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit our website at www.sraccounting.ie

 


 

STARTING IN BUSINESS – PART 2


Thanks for all your wonderful feedback following last month’s article.  It is great to know that so many of you found it useful.

When setting-up and running a business, VAT and PAYE/PRSI cannot be avoided!  In fact, the more thought and attention paid to these at the off-set will, in the end, save you many headaches and hopefully money!  So to it……

VALUE ADDED TAX

VAT is a consumer tax.  It is collected by VAT registered traders on their sales of goods and services and is payable on goods and services purchased for the business.  The difference between the VAT charged by you and the VAT you were charged must be paid to the Collector General.  If the amount of VAT paid by you exceeds the VAT charged by you, then a repayment from the Collector General is due to you.

You must register for VAT if you are a taxable person and your annual turnover exceeds or is likely to exceed £75,000 in the supply of goods or £37,500 in the supply of services.

Calculating VAT

Invoice/Sales Basis:  this is the normal basis of calculating VAT.  VAT liability is calculated when Sales Invoices are issued and received regardless whether they have been paid.
Cash Receipts Basis: You may use this if (a) at least 90% of your turnover consists of sales to unregistered persons, and (b) your turnover is less than €1million in any continuous 12 month period.   

VAT Invoices Must Include:

Your name, address and VAT number, sequential Invoice Number
Name and address of customer
Date of issue of invoice and date and supply of good and services
Description of goods/services including Quantity
Amount charged excluding VAT, VAT rate, Amount of VAT
Invoice must be issued within 15 days of end of month

Accounting for VAT

You MUST keep your books and records in good order, so that your VAT position can be clearly seen e.g Sales/Purchases/Cash/Cheque Payments and Lodgements Books.  These must be backed up by the relevant Sales and Purchase Invoices, Delivery Notes, Credit Notes and Customer Receipts.

When Must I Account For VAT

The normal VAT period is two calendar months, payable by the 19th of the following month e.g. Jan/Feb – file and pay by 19th March.  If using Revenue On Line – file and pay by 23rd March.
You will receive a Form VAT 3 every 2 months
Form VAT 3 is split into a number of boxes:
T1 – VAT due by you – Sales
T2 – VAT reclaimable by you – purchases
T3 – VAT payable by you to the Collector General
T4 – Excess VAT repayable to you from the Collector General
If there is no VAT in a 2 month period you must return the VAT 3 as zero.
If a Return is filed late or not at all, the Revenue will estimate the amount and apply interest.

I hope you found the above information useful.  Should you have any queries or feedback please contact me via our email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit our website at www.sraccounting.ie

 


STARTING IN BUSINESS – CONGRATULATIONS


Starting and running your own business requires commitment, long working hours, financial risks and a change to your current lifestyle.  Some of the traits found among successful entrepreneurs are persistence, desire for immediate feedback, inquisitiveness and a strong drive to achieve.  A high energy level and goal oriented behaviour are a must, as is vision, creativity and competitiveness.  With, of course, lots of luck!

Having set-up and run a successful business prior to my current bookkeeping and payroll business, I am delighted to have this opportunity to share my knowledge with you first hand, in hopefully a user friendly and informative format!


There are four legal structures that you can adopt for your business:


1)Sole Trader
2)Partnership
3)Limited Liability Company
4)Co-Operative

Choosing a good name for your business is often overlooked but is a very important asset to the business.  The name should be unique, easy to remember, pronounce and spell, non-offensive, informative and image creating. 

  • There are some rules that you will need to check out, depending on the legal structure of your business – governed by the Companies Registration Office.  Basically you cannot use the name of an existing business or a name that will be confused with the name of an existing business.  For more information, take a look at www.cro.ie. 
  • CRO state the following: Registration of a business name is obligatory if any individual or partnership (whether composed of individuals or bodies corporate or any combination of both) or any body corporate carries on business under a name other than their own true names. Its purpose is to make public the identities of those individual(s), partnerships or corporate bodies being the legal entity behind the business name.
  • To register a business name, submit one of the following forms, along with the registration fee to the CRO within one month of adopting the business name:
  • Form RBN1: for an individual
  • Form RBN1A: for a partnership
  • Form RBN1B: for a body corporate

One of the concerns people have when setting up a business is the various taxes that will have to be paid and returns that will have to be made to Revenue. Many people go from a situation of having paid tax by deduction under the PAYE system, to having to account for and pay their own tax annually. In addition they may have to account for VAT and/or PAYE/PRSI on a regular basis.  In setting up a business you are likely to ask questions such as:

How do I register for Tax?
What income do I pay tax on?
How do I meet my Pay and File obligations?
How do I deduct PAYE from my employees?
What rate is VAT charged at?
What records do I need to keep?

You are obliged to register the business with the Revenue, using a Form TR1 or Form TR2, to do this you must have a valid PPS Number.  If you were born in Ireland after 1971, you will automatically have a PPS Number, otherwise you will need to fill in a Form Reg1 which is available at any Social Welfare Office.

Form TR1: this form is for individuals, Sole Traders / Partnership / Trust / Unincorporated Body who need to register for:

  • Income Tax
  • Employer’s PAYE/PRSI - If you decide to employ someone you must register as an employer for PAYE/PRSI.  Note: If you set up a company, the company must register as an employer and operate PAYE/PRSI on the pay of directors even if there are no other employees
  • VAT - You must register for VAT if you are a taxable person and your annual turnover exceeds or is likely to exceed the limits prescribed by law for registration. The following limits apply: £75,000 in respect of the supply of goods, £37,500 in respect of the supply of services.
  • Relevant Contract Tax (as a Principle Contractor) – Relevant Contracts Tax (RCT) is a tax deduction system whereby a Principal Contractor: deducts tax at 35% from payments to subcontractors for whom he/she does not hold a relevant payments card, and maintains a record of payments to all Subcontractors regardless of whether he/she holds a relevant payments card for them.  Principal Contractors in the construction, forestry or meat processing industries must operate RCT on payments to Subcontractors.

SR AccountingForm TR2: this form is for limited companies (including foreign companies) who must register for Corporation Tax, Employer’s PAYE/PRSI, VAT and Relevant Contracts Tax (as a Principle Contractor) (as above).

Once registered for tax purposes you should access the Revenue On-Line Service (ROS) through Revenue’s website – www.revenue.ie.

After registering the business you may receive a “New Business Visit” from the Revenue.

Next time, we will take a further look at VAT and PAYE/PRSI.

I hope you found the above information useful.  Should you have any queries or feedback please contact me via our email This email address is being protected from spambots. You need JavaScript enabled to view it. or visit our website at www.sraccounting.ie

Sabine Rosler.


STARTING IN BUSINESS – CONGRATULATIONS