There will be an increase from 12.5% to 13.5% in the specified interest rate to be used in calculating the taxable benefit arising on preferential loans.
Where the preferential loan is a home loan, the specified rate will be decreased from 5% to 4%.
Its important to note in this time of low interest rates that a loan is not a preferential loan if the rate of interest is not less than the interest rate charged on similar loans to other individuals (Individuals who are not employee’s or their spouses)
Preliminary Tax is the estimate of Income Tax and USC / PRSI payable by you for a tax year and must be paid by 31 October in the year in question.(This may be extended if paying and filing on Revenue online ROS) In calculating your Preliminary Tax payment you should ensure that it covers your liability to PRSI and Universal Social Charge, as well as Income Tax.
To avoid interest charges, the amount of preliminary tax paid for a tax year must be equal to or exceed the lower of:
90% of your final liability for the tax year, or
100% of your final liability for the previous tax year, or
105% of your final liability for the pre-preceding tax year. (This option is only available where preliminary tax is paid by direct debit and does not apply where the tax payable for the pre-preceding year was nil).
In practice we generally recommend 100% of your previous years liability as it is virtually impossible to estimate your current years tax liability.
In any year in which you open a foreign bank account you are a ‘chargeable person’. This means that you are required to file a tax return in which you must declare, among other things, the name and address of the financial institution where the account is located, the date on which the account was opened, the lodgement made to open the account and details of any intermediary (individual or company) in Ireland who assisted you in opening the account.
The pay and file deadline is fast approaching. Revenue have announced that Thursday the 15th of November 2012 will be the deadline for customers filing using ROS. The October 31st deadline remains for paper filers.
If your filing yourself or using an accountant / tax consultant the following tips should help you out
1. Sole traders – understand your allowable expenses: There are a number of misunderstandings in relation to sole traders tax deductable expenses. For example unlike company directors sole traders do not claim mileage at a fixed amount, They claim a portion of motoring expenses instead. More information on sole trader expeses
2. Get rid of the shoe box: You can often reduce your accountants fee by sending in your information in an electronic format for example an excel sheet as opposed to a shoe box (Or worse carrier bag!) full of paperwork. There are a number of tools to assist with converting paper information to an electronic format including plendi and receipt bank which has a xero integration.
3. Use a checklist : The simplest way to organise your information for your income tax return is to use a checklist. This will save you time and highlight whats missing.
4. Understand your tax credits: Its not unusual for tax payers to miss out on claiming all of their tax credits. A full listing is available on the revenue website here . Understand what your entitled to and ensure you are claiming them
5. Landlords ensure you have your interest certificates: This is often the largest taxable deduction from your rental income. Ensure you have the certificates for all mortgages relating to your rental properties.
6. Check your income tax return: If you hire an accountant or tax advisor to complete your income tax return, ensure to read it and query anything you don’t understand before signing it . Income tax in Ireland is self assessment, so its your responsibility to ensure you are filing the correct information.
7. Do it now: Don’t procrastinate on your tax return, as the deadline nears accountants, tax advisor’s and the revenue will be a lot busier. This mean’s you may have to wait longer to have your queries answered.
8. Civil partners: On the 27th of July 2011 legislation was enacted so civil partners are now treated in a similar fashion to married couples. This can lead to tax savings in certain situations. Further details are available on the revenue website here
9. Surcharge on late returns: Here’s a little motivation for you to get your return in on time . If your return is late the surcharge, which is added on to your tax due, is:
♦ 5% of the tax due or €12,695, whichever is the lesser, where the Return is submitted after 31 October 2012 (15th of Nov for ROS fileres) and on or before 31 December 2012,
♦ 10% of the tax due or €63,485, whichever is the lesser, where the Return is submitted after 31 December 2012
10. Universal social charge: The health levy and income levy ceased on the 1st of January 2011. The universal social charge took over. There are limited exemptions to the universal social charge
The Universal Social Charge (USC) came into effect on 1 January 2011. It replaced both the Income Levy and the Health Contribution. It is a tax payable on gross income, including notional pay, after relief for certain capital allowances,but before pension contributions.
There is an annual exemption threshold of €4,004 up to 31 December 2011. This threshold increases to €10,036 with effect from 1 January 2012 and where this amount is exceeded, all of an individual’s income is chargeable.
The rates of USC are:
♦ 2% on the first €10,036
♦ 4% on the next €5,980
♦ 7% on the balance.
However, these standard rates are modified in certain circumstances. In the case of individuals aged 70 or over, and individuals who hold full medical cards, the 4% rate applies to all income over €10,036.
There is a surcharge of 3% on individuals who have income from self-employment that exceeds €100,000 in a year, regardless of age. Thus, where such individuals are under 70 years and do not hold a full medical card, a rate of 10% applies to such income and where such individuals are aged over 70 years or hold a full medical card, a rate of 7% applies.
There are a very limited number of exempt categories.
The more important of these include:
♦ All Department of Social Protection payments and similar payments received from other countries,
♦ Department of Social Protection-type payments received from State Bodies such as the HSE and FAS,
♦ Income already subjected to DIRT
Refunds of course or exam fees to an employee which have been paid by the employee, or direct payments of course or exam fees by the employer, will not be treated as giving rise to a taxable benefit where the course undertaken is relevant to the business of the employer.
A course is regarded as relevant to the business of the employer where it leads to the acquisition of knowledge or skills which are –
necessary for the duties of the employment, or
directly related to increasing the effectiveness of the performance of the director’s or employee’s present or prospective duties in the office or employment.
Where an employer provides an employee with a small benefit (that is, a benefit with a value not exceeding €250) PAYE, PRSI and Levies need not be applied to that benefit. Only one such benefit given to an employee in a tax year will qualify for such treatment. Where a benefit exceeds €250 in value the full value of the benefit is to be subjected to PAYE, PRSI and Levies. This concession does not apply to cash payments regardless of the amount.
One of the most common questions new clients ask before starting their business is should I incorporate a company. I have covered the advantages of a limited company over a sole trader in the past. But if your business (like so many others) looks like it will make a loss in the first few years there is some advantages to keeping the business as a sole trade.
For example in the tax year 2010 Niamh, a sole trader makes a tax loss in her trade , but pays tax in her part time PAYE position, the sole trader (Case I) loss can be offset against the tax paid in the PAYE position.
If there is no other income to offset the loss against then the loss can be carried forward. But if carried forward the loss can only be used to offset profits in the same trade.
To do this Niamh should enter the loss at line 112 on the return.
If you require any advice on the matters above please do not hesitate to contact Ralph on 01 – 4800531