1. Registering for TaxHow do I register for Tax?
You should advise the tax office when you start in business. You can do this by filling in one of the following form:
This form can be used to register for any or all of the following:
- Income Tax
- Employer’s PAYE/PRSI
- Value Added Tax
- Relevant Contracts Tax
If you are setting up a company you should fill in the following form:
This form can be used to register for any or all of the following:
- Corporation Tax
- Employer’s PAYE/PRSI
- Value Added Tax
- Relevant Contracts Tax
Shortly after registration you may receive a visit or you may request a visit from a Revenue official to assist you in operating the tax system.
Any difficulties or queries will be dealt with and general assistance will be given to help you comply with your tax obligations. You can request a "New Business Visit" from your local Revenue.
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2. Income TaxWhen must I make my Tax Return?
Pay and File was introduced in 2002 and brings major advantages and simplifications to the income tax system and streamlines filing and payment obligations for customers and their agents.
The main features in 2005 for self-assessment customers are;
31 October 2005
Return filing date for your 2004 tax return
Payment date for the following:
- Preliminary Tax (Income Tax) for 2005
- Balance of tax for 2004
- Capital Gains Tax for the initial period 2004 (1 January 2005 - 30 September 2005)
17 November 2005
Download Pay and File Guide (PDF 373MB)
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3. Taxable ProfitsWhat expenses can I claim for?
What expenses can’t I claim for?
What about expenses which are partly for business and partly private?
What expenses can I claim for?
You can claim for any business expenses 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 resale
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 expenses can’t I claim for?
The general rule is that you cannot claim for any private expenses i.e.
Any expense, not wholly and exclusively paid for the purposes of the trade or profession
Any private or domestic expenditure e.g. your own wages, food, clothing (except protective clothing), income tax etc.
Business entertainment expenditure i.e. the provision of accommodation, food, drink or any other form of hospitality.
You cannot deduct capital expenditure in calculating your taxable profits, however you can claim what are known as capital allowances on certain expenditure.
What about expenses which are partly for business and partly private?
Where expenditure relates to both business and private use, only that part which relates to your business will be allowed. Examples of such expenditure are rent, electricity, telephone charges etc., where the premises involved is used partly for business and partly for private purposes. These expenses will need to be apportioned to exclude the private use.
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4. Basis of Tax AssessmentsWhat income will be included in my assessment?
Your assessment to tax for any year is normally based on your actual income earned in the tax year i.e. from 1 January to the following 31 December.
If your income consists of profits from a trade, profession or vocation, and your annual accounts are normally made up to a date other than 31 December your assessment will be based on the profits of your accounting year which ends in the tax year.
What accounting date should I use?
It is up to you to decide the date to which you prepare your accounts.
You can prepare your accounts from the date your business started to:
The following 31 December (i.e. the end of the tax year) or
The date which is 12 months after the date on which you started or
Some other date appropriate to your business.
Most businesses work out their profits once a year, usually to the same date each year, and this is called your accounting year.
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5. Taxation of CompaniesHow is a Company Taxed?
Companies pay Corporation Tax. This tax is charged on the company’s profits which include both income and chargeable gains. A company’s income for tax purposes is calculated in accordance with Income Tax rules. Chargeable gains are calculated in accordance with Capital Gains Tax rules.
What is the rate of Corporation Tax?
There are three rates of Corporation Tax:
Rates effective from 1 January 2002
- 12.5% for trading income
- 25% for non-trading income
- 12.5% for small and medium-sized enterprises where the trading income does not exceed €253,948 (provision for marginal relief where income does not exceed €317,435).
The rate for Manufacturing, IFSC and Shannon companies remains at 10%.
How do I decide whether to trade as a Sole Trader or as a Company?
Your own individual circumstances will dictate whether you should operate as a limited company or as a sole trader. In addition to the taxation issues you need to consider there are various other practical and legal matters which should be taken into account when setting up a company and on which you should seek professional advice.
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6. Value Added Tax (VAT)Who must register for VAT?
How do I register for VAT?
What rate is VAT charged at?
Who must register for VAT?
You must register for VAT if you are a taxable person and your annual turnover (i.e. the amount of your receipts excluding VAT) exceeds or is likely to exceed the following annual limits
€51,000 in respect of the supply of goods
€25,500 in respect of the supply of services
You may also be obliged to register for VAT if you receive taxable services from abroad or if you are a foreign trader doing business in the State.
If you are involved in buying or selling goods within the EU you will need more detailed information and should refer to the comprehensive Guide to Value Added Tax which is available from any Revenue office.
How do I register for VAT?
To register for VAT you must fill in one of the following forms:
These forms can be obtained by telephoning the Revenue Forms & Leaflets Service at 1890 30 67 06 or from any Revenue office.
What rate is VAT charged at?
The standard rate of VAT is 21%:
This applies to all goods and services that are not exempt or liable at the zero or reduced rates
Reduced rate of VAT - 13.5%:
This applies to certain fuels, buildings and building services, certain newspapers etc.
Reduced rate of VAT - 4.8%:
This applies to livestock, live greyhounds and the hire of horses.
Zero-rated goods and services:
These include exports, certain food and drink, oral medicine, certain books etc.
Exempted goods and services:
These include financial, medical and educational activities.
If you need further information on the rate at which VAT is charged on goods or services please contact your Revenue office.
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7. Employer’s PAYE/PRSIMust I register as an employer for PAYE/PRSI if I employ staff?
YES. You must register for PAYE/PRSI if you pay:
€8.00 per week (€36.00 a month) or more, to an employee who has only one employment
€2.00 per week (€9.00 a month) or more, to an employee who has more than one employment.
A company must register as an employer and operate PAYE/PRSI on the pay of directors even if there are no other employees.
How do I register for PAYE/PRSI?
To register for PAYE/PRSI you must fill in one of the following forms:
PREM Reg - Employer (PAYE/PRSI) Tax Registration Form
Registration Form TR1 if an individual or partnership (download in PDF format);
TR2 if trading as a company (download in PDF format).
These forms can be obtained telephoning the Revenue Forms & Leaflets Service at 1890 30 67 06 or from any Revenue office. These forms can also be used to register for VAT. When you fill in the form and return it to the Revenue office, you will receive confirmation of your registration as an employer, a registered number for PAYE purposes and detailed information regarding the operation of PAYE/PRSI.
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8. P35 DeclarationsClick here for frequently asked questions on the P35.
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9. Paying Your Tax and Keeping Things SimpleWhat Tax can I pay by Direct Debit?
How does Direct Debit work?
What are the advantages of paying my tax by Direct Debit?
What Tax can I pay by Direct Debit?
You can pay your Preliminary Tax (Income Tax), VAT, or Employers PAYE/PRSI by way of Direct Debit.
How does Direct Debit work?
To avail of Direct Debit you must complete and sign a mandate which allows for agreed monthly deduction(s) from your bank account, for credit to your tax account(s). You remain in total control of the monthly amount(s) you have agreed to pay and the figure can be amended at any time by completing a fresh mandate form.
What are the advantages of paying my tax by Direct Debit?
Preliminary Tax (Income Tax)
By paying your Preliminary Tax by Direct Debit you can spread the payment over the calendar year for which the tax is due. This is particularly suitable if you find it difficult to make one lump sum payment in October.
Employer’s PAYE/PRSI and VAT
You will only have to fill in one annual return as follows:
For PAYE/PRSI you will only need to fill in the P35 at the end of the year and you will not have to fill in Forms P30 on a monthly basis
For VAT you will only need to fill in one annual VAT3 form at the end of the year and you will not have to fill in VAT3s on a bi-monthly basis.
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10. Keeping Books and RecordsAm I obliged to keep records for tax purposes?
YES. 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/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 accounts, or your summary of profits/losses, or your tax returns, must be correct. The records you keep must be sufficient to enable you to make a proper return of income for tax purposes.
You should bear in mind that you may need to keep accounts for reasons unconnected with tax. For example, your bank may want to see your accounts when considering an application for a business loan.
How long must I keep records?
You must keep your records for a period of six years unless your Inspector advises you otherwise.
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11. Revenue AuditWhat is a Revenue Audit?
A Revenue audit is a cross-check of the information and figures shown by you in your tax returns against those shown in your business records.
Revenue audit covers the following types of tax returns:
Income Tax, Corporation Tax or Capital Gains Tax returns and/or
The returns submitted in respect of VAT, PAYE/PRSI or Relevant Contracts Tax (RCT).
How are taxpayers selected for audit?
Revenue use three methods of selection. These are:
Screening tax returns:
The vast majority of audit cases are selected in this way. Screening involves examining the returns made by a variety of taxpayers and reviewing their tax compliance history. The figures are then analysed in the light of trends and patterns in the particular business or profession and evaluated against other available information.
Projects on business sectors:
From time to time, projects are conducted to examine tax compliance levels in particular trades or professions. The returns for a large number of taxpayers in a particular sector are screened in detail and a proportion of these are selected for audit.
Random selection:
This is in addition to the first two methods. It means that all taxpayers have a possibility of being audited. Each year, a small proportion of audit cases is selected using this method.
What form will the audit take?
Typically, an audit involves a series of steps, as follows:
On arrival, the auditor identifies himself or herself to you and explains the purpose of the audit. An indication of the length of time he or she expects to spend on your premises is also given.
You are given an opportunity to disclose to the auditor any inaccuracies in your tax return
The auditor will examine your books and records to verify that the figures have been correctly calculated and that the tax returns and/or declarations for the different taxes are correct
If the auditor finds the returns to be largely correct as is often the case, you will be told so as soon as this becomes clear
If the auditor finds that adjustments are required, he or she will quantify the adjustments and the additional tax. The details of how the additional tax arises will be discussed with you and you will also be notified in writing
At the final interview, the auditor will ask for your agreement to the total settlement figure
Once agreed, the full amount should be paid to the auditor who will issue you with a receipt.
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12. Freedom of InformationClick here for Frequently Asked Questions on Freedom of Information.
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