Self-employed tax take may fall by 30%

THE self-employed tax take could be down as much as 30% this year resulting in a significant shortfall for the exchequer.

The Association of Chartered Certified Accountants (ACCA) said the reduced tax yield will also be repeated in 2010, as the Minister for Finance is faced with at least two years of reduced income tax yield. In a sample of self employed tax returns, ACCA practising members reported that on average their clients’ profits are substantially lower in 2009 meaning their tax bill is also lower.

Reductions of an average of 50% were even reported in some practices.

The ACCA said all respondents to the survey said they had clients who could not afford to pay any tax.

Aidan Clifford, ACCA’s advisory services manager, said that although the amount due is on average down 30%, an increase in the amount of taxpayers seeking an instalment plan to pay their tax underpaying their preliminary tax for 2009 will further reduce the tax yield.

Those who can’t pay immediately will be faced with interest charges of around 8%.

Mr Clifford said: “The sample of ACCA members working in practice reported that, even with higher tax rates and income levies, their clients are paying on average 30% less tax in October 2009 compared to 2008.

“A small number of self-employed clients were reported to be paying more tax, particularly clients relying on property investment tax shelters or self-employed people in certain sectors of the economy, but this is being offset by clients getting tax refunds due to current year losses.”

Most self employed people pay all of their tax in one lump sum in October or November every year. The deadline is November 16, 2009.

Director of revenue audit services at McAvoy and Associates, Tony McGinty said however that given that VAT receipts in 2008 were down only 6.5% on 2007 a 30% drop in the self employed tax take seems anomalous. “The deterioration in 2009 is a lot worse, so far this year GNP is down 11.5% and domestic investment is down 34%. On this basis the preliminary tax payments based on estimated income are likely to be adversely affected,” he said.

Sonia McEntee of Astons Tax and Wealth consultants said clients that work in the construction industry, such as solicitors and architects, will be most affected.

“There are some solicitors whose profits are down between 50 to 70% and also a lot of architect firms have closed,” she said.