What expenses can I claim for (Sole Trader / Partnership)

What expenses can I claim for?
You can claim for any business expense, which you have incurred in order to earn your profits. These expenses are normally referred to as revenue expenditure. Revenue expenditure is your day to day running costs and covers such items as:
 Purchase of goods for re-sale, Wages, rent, rates, repairs, lighting and heating, etc., Running costs of vehicles or machinery used in the business, Accountancy fees, Interest paid on any monies borrowed to finance business expenses/items, Lease payments on vehicles or machinery used in the business.

If you are registered for VAT the expenses you claim should be exclusive of VAT.

What about Food and Subsistence Expenses?

It is a long established principle that the cost of meals taken at the place of business is not allowable for tax purposes. In addition, expenses incurred on meals consumed away from the place of business are, in general, not wholly and exclusively laid out for the purposes of the trade or profession since everyone must eat in order to live. Costs of meals may be allowable where a business by its very nature involves travelling, as in the case of self-employed long distance lorry drivers, or where
occasional business journeys outside the normal pattern are made.

This post is taken directly from revenues guide IT48

If you require any assistance with taxation please do not hesitate to contact Ralph for further advice

ralph@domybooks.ie or phone 091-442882

Professional services withholding tax

What is Professional Services Withholding Tax?
Professional Services Withholding Tax(PSWT) Is a deduction from payments made by certain public bodies for professional services provided to them. These bodies are known as accountable persons for the purposes of the PSWT scheme.

Is Professional Services Withholding Tax Another form of Taxation?
(PSWT) is not an additional tax. It is a deduction on account, made at the point of payment, of the final liability of the person who provides the professional service. PSWT is deducted at the standard rate of income tax.

It should be noted that PSWT is deducted from the total amount of the payment for the professional service involved, including, in general, any amount in respect of expenses, outlay or third party costs, but excluding any VAT charged by the person providing the service.

Which public bodies must deduct PSWT?

The following public bodies are regarded as accountable persons and are required to deduct PSWT from payments made by them in respect of professional services:

Government Departments and Offices
Local authorities, etc.
The Health Service Executive
Commercial and non-commercial semi-State bodies and their subsidiaries.
A comprehensive list of accountable persons is set out in Schedule 13 Taxes Consolidation Act 1997.

What professional services are subject to PSWT?

Basically, all professional services are subject to PSWT, including:

Services of a medical, dental, pharmaceutical, optical, aural or veterinary nature
Services of an architectural, engineering, quantity surveying or surveying nature and related services
Services of accountancy, auditing or finance and services of financial, economic, marketing, advertising or other consultancies
Services of a solicitor or barrister or other legal services
Geological services
Training services provided on behalf of FÁS.
What is the rate of PSWT?

The rate of PSWT is equal to the standard rate of income tax.

From whom should PSWT be deducted?

Subject to certain exclusions specified in the law (see Exclusions at the end of this leaflet), PSWT should be deducted by accountable persons from all payments made for professional services. The persons providing the services may be individuals, companies, partnerships or persons who may not ultimately have a liability to tax (e.g. non-residents).

How is PSWT collected?

When an accountable person (public body) makes a payment for professional services, it is obliged to deduct the PSWT from the total amount of the payment due,

including any amount in respect of expenses, outlay or late payment interest, but
excluding any VAT charged by the person providing the professional service and/or any Stamp Duties, Land Registry fees, Deed of Registration fees, Company Office fees or Court fees paid by that person to the appropriate authorities.
How does a person get proof that PSWT has been deducted?

Where a person provides professional services to an accountable person, the person providing the service is obliged to provide the public body with:

in the case of an individual, his/her Personal Public Service Number (PPS No.), and
in the case of a company, its tax reference number.
If VAT is included in the payment, the person’s VAT registration number must also be provided, if different from the PPS Number or tax reference number. Non-resident persons are required to state the tax reference that they use in their country of residence.

Those providing professional services for accountable persons should always ensure that the accountable person is aware of their PPS No. or tax reference number at the time payment is being made for services. The accountable person will, when making a payment for professional services, give the taxpayer person providing the service a Form F45 confirming the amount of the payment made and the amount of PSWT withheld.

Where exceptionally the Form F45 originally issued to the person providing the professional service is lost or destroyed, a Form F43 may be issued by the accountable person. A Form F43 may also be issued where the original F45 needs to be corrected. Requests by service providers for Forms F43 should only be made to accountable persons in these limited circumstances.

How is PSWT credited to the taxpayer?

General
Credit for PSWT deducted, as confirmed in Forms F45, should be claimed by taxpayers when submitting their relevant tax return forms. Forms F45 are valuable documents and should be presented to the taxpayer’s Revenue office, if requested, for verification.

For individual taxpayers assessable to income tax, credit for PSWT is normally given for the tax year in which the PSWT was deducted (however, see Commencing Business below).

For companies assessable to corporation tax, credit is given in for the accounting period in which PSWT was deducted.

Commencing Business
For an individual commencing business, credit for PSWT deducted in the first year of business will not normally be given until the second year of assessment. This arises because the first 12 month’s’ accounts form the basis for two years of assessment and the PSWT is deemed to be deducted in the second basis period. However, such an individual may qualify for an interim refund – see “Interim Refunds of PSWT”.

Preliminary Tax
A taxpayer who has had PSWT deducted can take this into account when paying Preliminary Tax. For example, if a taxpayer estimates Preliminary Tax liability for a tax year to be (say) €15,000 and has PSWT credits of €10,000 available, these can be used as part payment of the Preliminary Tax liability, leaving the balance of €5,000 to be paid directly to the Collector-General, under the Pay and File rules of the self-assessment system.

Interim refunds of PSWT

General
Where a taxpayer considers that the amount of PSWT deducted from payments is in excess of likely final liability to tax, an application may be made to the taxpayer’s Revenue office for an interim refund of any excess, instead of waiting to have it credited against final liability.

Application is made on Form F50 (available from Revenue Forms & Leaflets Service at LoCall 1890 306 706 and from the Revenue website at: Form F50 – Claim for an Interim Refund (PDF, 42KB))

The following three conditions must be satisfied before an interim refund of PSWT deducted from a payment can be made:

The profits of the period immediately preceding the period of claim must have been finalised,
The tax payable for that preceding period must have been paid in full, and
Forms F45 for the PSWT in question must be provided to the taxpayer’s Revenue office.
Example
An interim refund is claimed in relation to PSWT withheld from a payment made on 1/7/2008. Accounts are made up to 30 September each year.

For an individual to qualify for an interim refund, the profits of the basis period for 2007 (i.e. 30 September 2007) must have been finalised and the tax payable for 2007 must have been paid. For a company to qualify for an interim refund, the profits of the accounting period ended 30 September 2007 must have been finalised and the tax payable for the period must have been paid.

From the PSWT withheld, an amount equal to the tax liability at (ii) above is deducted (this is taken to approximate the likely liability for the year 2008). In addition any outstanding VAT, PAYE or PRSI liability is deducted. The balance of PSWT withheld, if any, is refunded to the taxpayer.

Commencing Business
A person who has recently commenced in business may wish to apply for an interim refund. Because such a person would be unlikely to satisfy the three conditions outlined above, Revenue applies special treatment whereby likely current tax liability is estimated and any excess PSWT deducted is refunded.

Particular hardship
Interim refunds may also be claimed in situations of particular hardship, even though all of the three conditions outlined above may not be fulfilled.

Some or all of those conditions may be waived where amounts of PSWT withheld are substantially in excess of likely final liability and failure to meet the conditions would not permit an interim refund in certain circumstances, such as:

due perhaps to a once-off or unusual receipt, a once-off or unusual reduction in income, or a demonstrable permanent reduction in income, or
if, through no fault of the taxpayer, there is a delay in finalising liability to tax for a particular year due to illness or other exceptional circumstance, or
if income tax liability (net of PSWT credited) paid in a period of claim together with PSWT deducted in that period exceeds an amount arrived at by multiplying the taxpayer’s income for the period by the higher rate of tax which applies for that period.
All applications for interim refunds should be made to the taxpayer’s Revenue office.

Pay and file deadline

Pay & File 2010
The final filing date for submission of the paper version of the 2009 Income Tax return (Form 11/11E) is the 31st October 2010. As this date falls on a Sunday, Revenue has put the following arrangements in place:

Over the course of the weekend, returns and payments may be dropped in to the post boxes in Sarsfield House, Francis Street, Limerick. There will not be any facility to acknowledge receipt of deliveries. Customised receipts will issue in all cases when payments have been processed. All such returns received by 9:00 am on Monday 1st November will be deemed as meeting the filing deadline.
As in previous years, returns with a postmarked date of 31st October will also be deemed as meeting the filing deadline.
Customers using Revenue On-line Service to both file and pay have until midnight 16th November 2010.

There is still time to register for ROS to take advantage of the extension mentioned above. ROS is the easiest and quickest way to meet all your tax obligations.

Pay and file deadline – Get a quote

As if you need any reminding, income tax returns for 2009 are due for filing by 31 October 2010. An extended deadline of 16 November applies to taxpayers who use the Revenue On-line Service to make payments and file their returns. These deadlines also apply to the payment of any balance of income tax due for 2009, together with preliminary tax due for 2010.

If you need tax advice on any matter, contact Ralph on 086 3336665 or ralph@domybooks.ie

Remeber you can outsource your entire bookkeeping and tax return to Do My Books for a very low cost payable monthly.

Tax Relief for Pension Contributions: Application of Earnings Limit in the case of Doctors with General Medical Services (GMS)[1] and private practice income

Tax Briefing 74 (September 2009) set out the operation of the aggregate earnings limit in situations where an individual has both earnings from employment and income from self-employment and makes contributions to both an occupational pension scheme/statutory scheme and a personal pension plan/PRSA.

In light of requests for clarification, this article illustrates the operation of the aggregate earnings limit for doctors with GMS income and income from private practice where they make contributions to both the GMS Superannuation Plan/AVCs [2] and to personal pension plans/PRSAs.

Revenue confirms that pensionable GMS income (i.e. net GMS remuneration [3]) makes up the first part of the aggregate earnings limit of €150,000 and net relevant earnings in respect of private practice income will, effectively, be zero where the GMS pensionable income is €150,000 or more. However, in light of the apparent uncertainty concerning the correct application of the earnings limit, transitional arrangements will apply for 2009 (see final section of this Tax Briefing).

Background
Under section 773 of the Taxes Consolidation Act 1997 (TCA) the superannuation arrangements for doctors under the GMS Scheme is approved by Revenue, for the purposes of Chapter 1 of Part 30 of that Act, as if the GMS Plan were a retirement benefits scheme for employees. Tax relief for contributions made by doctors to the Plan is given, therefore, under the provisions of Chapter 1.

Section 773(3) effectively deems GMS income to be “remuneration from an office or employment” and specifically excludes that income from being taken into account in the calculation of net relevant earnings for the purposes of any claim to relief in respect of premiums paid towards a personal pension plan (RAC).

Tax Relief for Pension Contributions
As set out in Tax Briefing 74, tax relief for pension contributions is subject to two main controls. The first control is an age-related percentage limit (see end Note) of an individual’s remuneration/net relevant earnings, whilst the second control places an overall upper limit (€150,000 from 2009 onwards) on the amount of remuneration/net relevant earnings that may be taken into account for the purposes of giving tax relief.

In addition, section 790A TCA provides that, for the purposes of giving tax relief to an individual on contributions made to a retirement benefits scheme and to a personal pension/PRSA etc. the aggregate of the individual’s remuneration, within the meaning of Chapter 1, and net relevant earnings within the meaning of Chapter 2 (RACs) and Chapter 2A (PRSAs) shall not exceed the earnings limit. In essence, therefore, where an individual has both remuneration from employment and net relevant earnings in respect of self-employment, the aggregate of the remuneration and net relevant earnings that can be “pensioned” for tax relief purposes cannot exceed €150,000. Revenue confirms that, if the pensionable remuneration from an office or employment in a year equals or exceeds the €150,000 limit, there is no scope to get tax relief on contributions to a personal pension plan/PRSA for that year. In effect, the legislation requires pensionable remuneration to be considerd first in determining the overall amount of tax relievable contributions that can be made in any year as between occupational pensions (including AVCs) and personal pensions/PRSAs.

Given that section 773 TCA treats a doctor’s GMS income as “remuneration from an office or employment”, the operation of the aggregate earnings limit outlined above applies to doctors with GMS and private practice income in the same way i.e. the GMS income and GMS Superannuation Plan contributions must be considered first in determining the overall amount of tax relievable contributions that can be made by a doctor in any year as between occupational pensions (including AVCs) and personal pensions/PRSAs.

The following examples illustrate the operation of the aggregate earnings limit in such circumstances.

Example 1
John is a GP aged 56. He is in receipt of net GMS remuneration in 2009 of €100,000 of which capitation income is €80,000 and he has net relevant earnings of €100,000 in respect of his private practice income.

As a member of the GMS Superannuation Plan, John is contractually required to make a contribution of 5% of the capitation element of his GMS remuneration to the plan. In addition, during 2009 John has paid regular monthly AVCs of €500 per month in respect of his GMS remuneration and has paid premiums of €1,000 per month to a personal pension plan (RAC) in respect of his private practice earnings. John is about to complete his 2009 tax return and wishes to maximise his pension tax relief for the year. What are his options?

Overall, the potential maximum contributions in respect of which John can claim tax relief in 2009 is €52,500 i.e. the earnings limit of €150,000 multiplied by the relevant age related % limit of 35%.

John’s pensionable remuneration must be considered first. In relation to his net GMS remuneration, John has already made contributions of €4,000 as a result of his 5% contribution to the GMS Plan and a further €6,000 in AVCs, giving total contributions of €10,000. Under pension tax rules, John may make tax relievable contributions of up to €35,000 in respect of his net GMS remuneration as between the main GMS Plan and AVCs. Subject to overall benefit restrictions, John may have scope, therefore, to make a special “last minute” AVC of up to €25,000 under the provisions of section 774(8) TCA before the 2009 return filing date and elect to claim the relief on the contribution in 2009 so as to maximise his relief.

Having pensioned €100,000 of his net GMS remuneration, John has “used up” that amount of the €150,000 earnings limit, thus restricting his capacity to make tax relievable contributions in respect of a personal pension plan/PRSA to 35% of €50,000 i.e. €17,500. He has already made regular RAC premiums totalling €12,000 in 2009. On that basis he has capacity, under section 787(7), to make a further tax relievable RAC or PRSA contribution of €5,500 before the return filing date and elect to claim the relief in respect of the contribution in 2009.

Overall, as between his GMS Plan/AVC contributions of €35,000 and his RAC contributions of €17,500 John has claimed his full entitlement to tax relief.
Example 2
Jean is a GP aged 43. She is in receipt of net GMS remuneration in 2009 of €160,000 of which capitation income is €130,000 and she has net relevant earnings of €100,000 in respect of her private practice income.

As a member of the GMS Superannuation Plan, Jean made a contribution of €6,500 (5% of the capitation income) to the plan in 2009. In addition, during 2009 Jean has paid regular monthly contributions of €500 to a PRSA in respect of her private practice income. Before completing her 2009 tax return, Jean wants to establish what her position is as regards claiming relief on the contributions already made and on maximising her relief in 2009.

Overall the potential maximum contributions in respect of which Jean can claim tax relief in 2009 is €37,500 i.e. the earnings limit of €150,000 multiplied by the relevant age related % limit of 25%.

As in Example 1, Jean’s pensionable GMS income must be considered first. In this case, as her net GMS remuneration exceeds the earnings limit of €150,000, she has no scope to claim relief for her PRSA contributions in 2009.

Jean has already made a contribution of €6,500 to the GMS Plan. Assuming she has capacity to do so (having regard to overall benefit restrictions), Jean has scope to make a special “last minute” AVC of up to €31,000 under the provisions of section 774(8) TCA before the 2009 return filing date and elect to claim the relief on the contribution in 2009 so as to maximise her relief.

Jean’s PRSA contributions cannot be relieved in 2009 and must be carried forward for relief in future years. This is the position irrespective of whether Jean decides to make an AVC or not.

Transitional Arrangements
In light of the apparent uncertainty concerning the correct application of the earnings limit, the following transitional arrangements will apply in relation to the operation of the limit for 2009 in respect of doctors with GMS and private practice income.

Where a personal pension /PRSA contract was entered into before 7 September 2010 (the date of issue of this Tax Briefing) and the contribution

was actually paid in 2009, or
was paid before 7 September 2010 in respect of 2009 (i.e. where the taxpayer elects, before the 2009 return filing date, to have the contribution treated as if it was paid in 2009)
Revenue will not seek to apply the approach outlined in this Tax Briefing article and doctors may claim relief for 2009 on the same basis as in previous years, subject to the relevant age related and earnings limits not being breached.

Contributions made on or after 7 September 2010 in respect of 2009 and contributions made during 2010 in respect of 2010 (whether made before or after 7 September) fall to be treated under the approach outlined in this Tax Briefing.

In light of the transitional arrangements for 2009, years prior to 2009 are not affected by this Tax Briefing.

Age Limits
Up to 30 years 15% of remuneration/net relevant earnings
30 – 39 20%
40 – 49 25%
50 – 54 30%
55 – 59 35%
60 and over 40%
Footnotes
[1] Now called Primary Care Re-imbursement Service Scheme – For ease of reference GMS is used in this Tax Briefing

[2] Since 2001, AVCs may be made up to the relevant age related % of a doctor’s net GMS remuneration (see Footnote 3) subject to the earnings limit, less the sum paid by way of the 5% contribution to the main GMS Plan.

[3] “Net GMS remuneration” is defined as income derived from the GMS Scheme contract less any expenses set against that income for the purposes of assessing the doctor’s liability to tax. It was introduced in 2001 in the context of the extension of AVCs to the GMS Plan. It is determined by deducting net relevant earnings in respect of private practice income (calculated in accordance with Tax Briefing 28 of October 1997) from the doctor’s overall net income (i.e. gross income less expenses and capital allowances).

Self Employed Accounts

With more and more entrepreneurs starting up businesses self employed accounts is something I get asked about quite often.

Self employed individuals (sole traders and partnerships) will need the following information to prepare their accounts for tax purposes:

Business takings, (Revenue, Turnover)
All items of expenditure incurred, such as purchases, rent, lighting, heating, telephone, insurance, motor expenses, repairs, wages etc.,
Any amount of money introduced into the business and its source,
The amount of any cash withdrawn from the business or any cheques drawn on the business bank account, for your own or your family’s private use (these items are normally referred to as drawings),
Amounts owed to you by customers, showing the total amount owed by each debtor,
Amounts owed by you to suppliers, showing the total amount you owe to each creditor,
Stock and raw materials on hand.

The following accounts should then be prepared
A Trading Account
A Profit and Loss Account
A Capital Account
A Balance Sheet

Extracts from the accounts are entered into the form 11

If you require any assistance with self employed accounts please email:

ralph@domybooks.ie

Or Call Ralph directly on 086-3336665

What is preliminary tax – Accountants Galway

Preliminary Tax is an estimate of your total tax bill for the year which you pay on the 31st of October every tax year. Its important to remember that preliminary tax also includes PRSI, Health Levy and Income Levy

The amount of Preliminary Tax paid for any year is not less than the lower of:

90% of the final liability for the current tax year
The final liability to tax for the immediately previous year (100% Rule) or
105% of the final liability for the pre-preceding year where the Collector- General is authorised to collect tax by direct debit.

Tax flow can be improved by choosing which preliminary tax to pay. For example if your sales have increased dramatically in the current tax year it is cashflow advantageous to pay 100% of the last years tax bill

Rent a room relief – Tax Saving Tip

Rent a Room Relief – where a room (or rooms) in a person’s principal private residence is let as residential accommodation, gross annual rental income of up to €10,000 (€7,620 in 2007) is exempt from tax. This does not affect an individual’s entitlement to mortgage interest relief or CGT exemption for a principal private residence.

To get rent a room relief:

The total (gross) rent you get from your tenant (or tenants), which includes sums the tenant pays for food, laundry or similar goods and services, cannot exceed €10,000. If you get rental income over and above this amount, you are not entitled to the relief
Your home must be in Ireland and must be occupied by you during the year of assessment as your principal private residence.
You cannot deduct expenses from your rental income to qualify for rent a room relief. If you qualify for rent a room relief, the income you get from renting a room in your home is not liable to PRSI, the health levy, the income levy or income tax. However, it must be included on your annual income tax return.

If you require any further information please do not hesitate to contact Ralph on
tax@domybooks.ie or 0863336665

Remember to check if you are due a tax refund on www.brownenvelope.ie

RCT – Relevant Contracts Tax

If you are a principal contractor, You must deduct Relevant Contracts Tax at 35% from payments made by you to an unauthoriesed subcontracted you have engaged to carry out relevant contract for example: meat processing, construction operations or meat processing on your behalf.

You do not need to deduct RCT payments from a subcontractor who produces a C2 (Subcontractors certificate)

If you are an unauthorised subcontractor, you can claim credit for RCT paid by you against your tax liability. You may also claim an interim refund of RCT paid if the tax payable for the likely period exceeds the proportionate liability for the entire tax year.

Distinguishing employee’s from contractors is very topical at the moment. Principal contractors should be extremely careful in this area as they would be liable for the PAYE, interest and penalties IF it was found that their contractors were actually employees.

If you require any assistance or advice with RCT please do not hesitate to contact

tax@domybooks.ie
or phone Ralph on 086- 3336665

Tax Return Help Form 11 – Rental income

Are you confused about your Tax Return?

Do you have unused capital allowances from a prior year?
Rental income
Unused loss from a prior year
Accelerated capital allowances
Maintenance payments
Foreign Rental income
Exempt income
Retirement Annuity Contracts
Capital Gains

We can help.
We offer fixed prices for each tax return (form 11) which are extremely competitive and agreed in advance.

If you would like a no obligation quotation please contact Ralph on
086-3336665 or tax@domybooks.ie