A helping hand with do-it-yourself tax

In the second of our two-part series on how to get money back from the taxman, Niamh Hennessy takes a look at the self-employed worker. She also puts a spotlight on revenue’s online tax return system, has a look at what you need to know if you’re starting work for the first time in Ireland — and tells you what happens if you don’t pay your taxes.

THERE are certain things to consider when working as a self-employed person in Ireland.

Firstly, you must register as self employed and register for tax by filling in the appropriate registration forms. These forms are:

nForm TR1 (tax registration): this registration form is for an individual, or sole trader. It is also used to register trusts and partnerships.

nForm TR2 (tax registration): Tax registration form for companies.

Form TR1 or TR2 as appropriate, can be used to register for income and corporation tax; employer’s PAYE/PRSI; Value Added Tax (VAT) and Relevant Contracts Tax.

You can get these forms from the revenue website or by calling revenue’s forms and leaflets service at lo-call 1890 306 706.

You must keep full and accurate records of your business from the start. You need to do this whether you send in a simple summary of your profit or loss, prepare the accounts yourself or have an accountant do it.

It is important for you to remember that the figures which are contained in your tax returns, your accounts, or your summary of profits or losses, must be correct. The records you keep must be sufficient to enable you to make a proper return of income for tax purposes.

You must also bear in mind that you may need to keep accounts for reasons other than tax. For example, your bank may want to see your accounts when considering an application for a business loan.

The type of records you will need to keep will depend on the nature and size of your business.

At the end of the accounting period, you will need to have details of:

* Your business takings.

* 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* The amount of any cash withdrawn from the business or any cheques drawn on the business bank account for your own or your family’s private use (these items are normally referred to as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.

In order to keep control of your transactions a full double-entry book-keeping system is recommended. Any system which falls short of this should be capable of showing the amount and source of all income and all purchases and other outgoings.

You will also need to prepare and retain accounts as follows:

* A trading account.

* A profit and loss account.

* A capital account.

* A balance sheet, though depending on the circumstances and level of your trading activities, a capital account and balance sheet may not always be required.

Generally you are no longer required to submit your self-employed business accounts with your return of income. You must still, however, prepare accounts and then extract the relevant information from your accounts for entry in the Extracts From Accounts pages of the Return of Income Form, Form 11 or Form 11E, as applicable.

You must keep your records for six years, unless your inspector of taxes advises you otherwise.

There is a common date for the payment of tax and filing of returns, ie October 31. By this date each year you must file your tax return for the previous year, pay your preliminary income tax for the current year and the balance, if any, of tax due for the previous year. This system, “pay and file”, allows you to file your return and pay your tax at the same time.

You can also avail of revenue’s online service, ROS, on the site www.revenue.ie, which provides a secure and cost-effective way of meeting your revenue obligations.

Also, it should be noted that it is not necessary to employ an accountant or tax adviser in order to complete your tax returns and claim the various credits and reliefs due to you.