Incorporating a farm

Dublin Accountants

As personal tax rates continue to increase there is a growing number of advantages for certain farmers to incorporate. While not for every farmer there may be significant t

ax savings for larger higher earning farmers .

The largest advantage is capitalising the farmers own stock and machinery creating a directors loan inside the limited company which can be drawn down tax free by the farmer. This is a once off opportunity so timing is critical to maximise tax relief. Its also worth noting that buildings and land are generally not transferred inside the limited company as this could give rise to capital gains tax liabilities in the future.

Land , single farm payments and buildings may be leased to the limited company by the farmer.

Plant and machinery or Fixtures and Fittings do not normally give rise to capital gains tax as they usually transfer at Tax Written Down Value (TWDV)

Further advantages include

  • The availability of limited liability (Although less of an advantage in 2011 with large scale personal gurantee’s requested)
  • The ability to claim civil service rates of mileage and subsentence on business travel
  • Separation of personal assets from business assets

As the transfer from you to your company is treated as being at open market value between two separate legal entities, stamp duty will apply on the transfer.

Incorporation is not something to take lightly as it comes with increased compliance costs and cannot be undone. This post is not comprehensive and there is other matters to consider.

For further information please call us on Do My Books Dublin Accountants 01-4800531

Commencement Rules

Commencement Rules

When you start business as a sole trader / partnership there can be a significant period before you make your first tax return. It is important to remember that although you may not have to file a tax return you still must pay preliminary tax.

This is best explained with an example

New Business

You started in business on 1 July 2009 during the tax year 2009.
Payment and Return Filing dates will be as follows:

Preliminary Tax for 2009 due on or before 31 October 2009,
Preliminary Tax for 2010 due on or before 31 October 2010,

Balance of tax due for 2009 must be paid on or before 31 October 2010,
Tax returns for 2009 and 2010 to be submitted on or before 31 October 2011

De-Register as a sole trader

Dublin Accountants

If you need to de register from a particular tax you can use the form TRCN1

This form covers
Employers Taxes (PAYE/USC/PRSI)
Income Tax
Corporation Tax

For any tax advice please feel free to contact us on 091-442882

VAT on services

In recent months I’ve noticed a few people mentioning that the VAT rate on services is 13.5% (One even charged it incorrectly on an invoice). Simply put the VAT rate on services is often NOT 13.5%

13.5% is the ‘lower’ rate of VAT. 21% is the ‘standard’ rate of VAT.

To give you an example the following services are all invoiced at 21%

Property Auctioneering
Consultancy (Excluding farm)
Quantity Surveyors
Art & Artists, Design – (Adverts,commercial drawings)

This list is by no means exhaustive. The moral of the story is! If your not sure what VAT rate you should be charging check it out.

If you would like any advice on VAT matters please phone Ralph on 091-442882

Motor Tax rates CO2

Tax Band Annual Half Year Quarter Year Arrears (Per Month)
0 – 120 104 57 29 10.40
121 – 140 156 86 44 15.60
141 – 155 302 167 85 30.20
156 – 170 447 248 126 44.70
171 – 190 630 349 177 63.00
191 – 225 1050 582 296 105.00
226 – 999 2100 1165 593 210.00

Universal Social Charge (USC)

In an effort to rationalise the taxation system to some extent the minister has decided to abolish health levy and income levy and replace them with a universal social charge. The universal social charge has been touted as revenue neutral but as I haven not made my calculations I cannot confirm that yet. While this will go some way towards simplifying the administration and understanding of the income tax system there is still a long way to go.

Details of the universal social charge rates and annual thresholds are below.

0% < €4,004

2% €0 to €10,036

4% €10,037 to €16,016

7% > €16,016

Standard rate tax bands 2011

As expected in todays budget the standard rate tax bands have been decreased. Details of the new tax bands are below.

Single/Widowed €36,400 €32,800
Married one income €45,400 €41,800
Married Two Incomes* €72,800 €65,600
One Parent/Widowed Parent €40,400 €36,800

Revenue defaulters list analysed – Results of Revenue Audits

The latest revenue defaulters list has been released for Quarter 3 2010

Outside of Dublin South eastern counties had the highlest levels of tax, fines and penalties collected through the revenue audit system with Waterford coming in at over €3M

In terms of occupation the old reliables are top of the list. With Company directors and farmers in the top 5 as always.

If you have issues in relation to a forthcoming revenue audit or are concerned about your status in relation to tax compliance its better to resolve the issues now before the revenue auditor comes knocking on your door. We can help please contact or 091 -442882 for further information

How to apply for a tax clearance cert.

A tax clearance cert may be required for a variety of reasons including when doing business with a government department or semi state body.

Apply is very simple. Firstly ensure your taxes are in order and paid up to date. If for what ever reason they are not you will need to speak to your local revenue office before making the applications.
To apply simply click here.

As always if there is anything I can do to help please feel free to email or phone / 091 -442882

Preliminary tax in the first year of trading

This is a common question from entrepreneurs starting their own business and worried about tax.

The notes below are taken from the revenues statement of practice.

There is a special provision for the year of assessment in which taxpayers commence to be chargeable persons. Basically, this is that, in applying the 100 % rule, the tax payable for the preceding year can be taken to be NIL. Taxpayers will not, therefore, incur an interest charge by reason of not paying Preliminary Tax for the year of assessment in which they become chargeable persons. if no Preliminary Tax is paid, the full liability for the first year of assessment will have to be paid within one month of receiving an assessment; otherwise interest will arise.

While a taxpayer who becomes a chargeable person will not incur an interest charge if no Preliminary Tax is paid in the first year of assessment, it is recommended that taxpayers pay Preliminary Tax as near to their final liability as they can estimate. It is considered that this is in taxpayers’ best interest Otherwise, the following payments will have to be made within a short period, which may cause cash flow problems for taxpayers:

–  Preliminary Tax for the second year of assessment, on 1 November in the second year of assessment.

–  Preliminary Tax for the third year of assessment, on 1 November in the third year of assessment.

–   Full liability for the first year of assessment and the balance of any liability for the second year of assessment,  February/March of the third year of assessment.

A taxpayer who is already a chargeable person but commences another source of income in a year of assessment cannot rely on the “NIL” rule. Preliminary Tax must not be less than the minimum 100% or 90% rule in such a case.