Reduce your tax bill as an employee

As A PAYE there is limited opportunities to reduce your tax bill but one thing you may be able to do is claim flat rate expenses based on your employment category. The list below is the most up to date on Revenue.ie

List of expenses from Revenue.ie

If you require any further information please do not hesitate to contact us at

taxhelp@domybooks.ie

As Accountants based in Galway we can assist you in reducing your tax liability

Advantages of a limited company over a sole trader

This is a common issue for entrepreneurs, Should they operate as a sole trader or limited company. From a purely tax point of view if your company profit is larger than you need to live on a Ltd company is the likely to be the most tax efficient option.

The savings would work as follows, 
Profit for yr €1.2M
Drawings required to live off €200K (These will be taxed as income tax either option)
Remaining Profit €1M

Taxed as a sole trader
€506K income tax (approx)
Remaining Profit €494k

Company option (again using €1M remaining profit)

€1M @12.50 % = €125k corporation tax due

Remaining Profit €875k

BUT funds are stuck in the company , final step is to ultimately liquidate the company and pay CGT on the increase in your share holding

Current CGT Rate 25% 

So remaining funds of €875k @ 25% = €219K

Remaining Profit €656K

Saving €656k-€494k = €162K

There is also better scope for sheltering pension contributions using a company and you can get limited liability. 

Disadvantages include increased compliance costs, Solicitors, Accountants ect.

This technique would be used as part of a long term tax plan and would in the real world is not that as simple as above as capital gains rates may change ect.

Voluntary liquidation comes with its own issues you may not be allowed operate as a director for a time afterwards all of which would have to be researched before embarking on this.

This blog post is from an Accountant based in Galway if you would like to discuss this further please do not hesitate to email

tax@domybooks.ie

Disclaimer: This blog post is my opinion and should not be treated as tax advice.

Small Businesses can now use the small claims court

Good news for small businesses in Ireland. The dept of justice has made a press release annoucing small businesses can under certain circumstances use the small claims court. Prior to this development the legal costs in suing an individual were large and only relevant when the amount was large, this welcome development allows for recourse with smaller amounts.

Details are below are taken from here

Ahern extends Small Claims Procedure to cover business claims

The Minister for Justice, Equality and Law Reform, Mr. Dermot Ahern, T.D., today announced that he has introduced new Court Rules to extend the current remit of the Small Claims procedure to include certain business claims. The new rules will facilitate claims from a business against another business in respect of goods or services not exceeding €2,000.

Introducing the new Small Claims procedure Minister Ahern said “This Government is conscious that all businesses, but small businesses in particular, have been significantly affected by the very difficult economic situation that this country is facing. Businesses, as well as consumers, can find themselves in a position where they have a legitimate claim against another business or vendor in relation to a contract in respect of goods or services purchased.

The extension of this successful procedure will provide a choice of legal routes to pursue a small claim as the current civil bill system will also remain available. This will allow a business choose whichever route, small claims or civil bill procedure, it considers most economic and appropriate to its circumstances.”

The Minister went on to say that “By limiting the new procedure to consumer and business to business claims, the fundamental pro-consumer ethos of the small claims process will be maintained. It is essential that consumers, especially in vulnerable economic circumstances, are protected. The new procedure provides the necessary safeguards for consumers.”

The new rules will come into effect on 11 January 2010.

5 January 2010

Note For Editors

The new Small Claims procedure amends District Court Rules (Order 53A of the District Court Rules 1997). The consumer or business must have purchased goods or services from someone selling them in the course of business. Claims cannot be made in respect of debts, personal injuries or breach of leasing or hire purchase agreements. The procedure provides an alternative and complimentary mechanism to the civil bill procedure.

It should be noted that Irish jurisprudence currently requires limited liability companies to engage legal representation for an court based proceedings. The Minister has requested that this precedent be reviewed by the Company Law Review Group.

This is the Blog of an Accountant based in Galway providing Bookkeeping services and accountancy software

Will your business survive 2010?

Almost every business owner I speak to at the moment is having issues with their cash flow and unfortunately more business’s will fail in 2010.  You can have thousands of great customers and make huge profits but without cash flowing through the busines it will fail. Despite what the advertisements say Banks are still declining lots of loan/ overdraft applications so micromanaging  working capital is critical.

Firstly what is working capital? Working Capital is loosesly regarded as: Current Assets – Current Liabilities

Managing working capital involves ensuring the business remains liquid by balancing the  need to keep  adequate cash to meet obligations on one hand and on the other hand  not being too conservative and utilising the available funds.

Sounds good but how can we do it, Most important is the matching concept (sounds exciting doesnt it) This means long term assets (fixed assets: Buildings , vehicles ect..) must be financed by long term funds, (Debt/ Equity) , Short term assets can be financed with short term funds (Creditors/ Overdraft).

Mis-matching can have lead to serious issues, for example if a long term asset is purchased using an overdraft, The overdraft may expire due to a change in circumstances. This could have disastrous effects for the company.

Working capital management is crucial to liquidity. To assess the liquidity of a company we can use the current ratio:

Current Ratio= Current Assets/Current Liabilites

The ‘prefect/ideal world (never happens!)’ current Ratio is 2:1 so even if the current assets halved their would be funds remaining to pay creditors but presently in business in Ireland 2010 any figure above 1.5 is very healthy. If the current ratio falls below 1:1 there is likely to be serious liquidity issues.

If you would like a free consultation on your companies cash flow situation please email me at:
cashmanagement@domybooks.ie

This is the Blog of an Accountant based in Galway providing Bookkeeping services and accountancy software