Sharon O’ Connor,Director – FGS Audit & Advisory
Declan O'Hanlon,Partner – FGS Taxation
This slide presentation is for guidance purposes only and should not be relied upon as being sufficient in specific circumstances.
Sharon O’ Connor, Director – FGS Audit & Advisory
A separate Practice bank account should be opened. If applicable both a current & deposit account should be opened
All cash receipts that relate to income should be lodged to the practice current account
Only payment of business expenses should be made out of the business account
Do not make business purchases out of personal bank accounts and vice versa.
Money should be transferred from the Practice current account to your personal bank account for personal expenditure
Income is recognised for tax purposes when it is received
As Barristers income is accounted for on a cash receipts basis and you are taxable on a cash receipts basis
A liability to Revenue arises in respect of VAT when income is received and not when the pro-forma invoice is issued
FGS Date: 01/01/2010Molyneux House Fee Note No 1Bride Street VAT No. IE………………Dublin 8
FEE NOTE________________________________________________________________________________________
Description Vat Rate €
Fee for professional services rendered 21% 3,000.00
Outlay 0% 10.00
VAT Rate Total Net Total VAT21% 3,000.00 630.00 Total Net Amount 3,010.000% 10.00 0.00 Total VAT Amount 630.00
________TOTAL DUE 3,640.00
________
• What classifies as a business expense?
• An expense is a business expense when it is wholly and exclusively for the purpose of your business
• Example: Law Library fees, stationery, telephone, Accountants’ fees,motor and travel expenses and subscriptions for books
• VAT can be reclaimed from Revenue when an individual is VAT registered, is in receipt of a valid VAT invoice and the invoice relates to a business expense
• The invoice must be addressed correctly and have the supplier’s VAT number quoted on the invoice
A bi-monthly VAT return is due to be lodged with Revenue and any liability due paid by 19th of following month, i.e. Sept/Oct ’10 VAT return is due by 19 November 2010 or 23 November 2010 if filed and paid online.
There are a number of options for filing VAT returns:- Pay the liability based on the bi-monthly VAT return- Prepare and file an annual VAT return pay DD monthly and pay the balance at year end
We recommend preparation and filing of a bi-monthly VAT return & pay liabilities as they arise. This ensures better cash flow management and ensures that a large liability to Revenue does not arise
Schedule of sales invoices
Schedule of purchases invoices and expenses
Analysis of lodgements to the bank
Analysis of cheque payments / direct debit analysis
Recommend Excel as a useful means of maintaining the schedules as highlighted above
Date Details Invoice No
Gross Net Vat
05/01/10 Joe Bloggs
001 121 100 21
12/01/10 S Smith 002 150 123.96 26.04
22/01/10 S Flynn 003 242 200 42
31/01/10 B Byrne 004 605 500 105
TOTAL 1,118 923.96 194.04
Date Details Invoice No
Gross Net Vat Phone Law Library
01/01/09 Eircom 1 121 100 21 100
02/01/09 Law Library
2 242 200 42 200
10/01/09 Vodafone 3 181.50 150 31.5 150
21/01/09 Eircom 4 423.50 350 73.5 350
TOTAL 968 800 168 600 200
Date Details Invoice number
Total Capital Introduced
VAT Sales Sundry
05/01/09 Joe Bloggs 001 121 21 100
10/01/09 Capital Introduced
n/a 10,000 10,000
12/01/09 S Smith 002 150 26.04 123.96
15/01/09 Eircomrefund
n/a 45 45
TOTAL 10,316 10,000 47.04 223.96 45
Date Details Invoice Number
Total Trade Creditors
Revenue re VAT
DrawingsSundry
10/01/09 Eircom 1 121 121
12/01/09 Vodafone 3 181.50 181.50
15/01/09 Drawings –self
n/a 1,000 1,000
TOTAL 3,121 302.50 2,000 1,000
VAT on Sales
T1 4 7 .00
VAT on Purchases
T2 1 6 8 .00
Excess of T1 over T2 (Payable)
T3 0 .00
or Excess of T2 over T1 (Repayable)
T4 1 2 1 .00
Amount of Payment
0 .00
Information required for end of year:
Bank statements, sales invoices, purchase invoices
Copies of VAT returns
Analysis of bank, purchases and sales invoices
Details of business expenses paid out of personal back account –if any
Chargeable on supply of good and services within the State
Registration- Limit €37,500 in a twelve month period - Voluntary registration- Even if income is <€37,500 it may be worth registering for VAT to avail of the purchases input credits- T.R.I must be completed in order to register for VAT with Revenue
Returns- Bi-monthly returns- Due date 19th of following month/23rd if you file and pay online
Accounting for VAT- Cash receipts basis- Rates of VAT 21% and 0%- Purchase Input credits
UK and foreign clients – If billing a non tax registered individual the VAT rate is 21%
If billing a VAT registered individual or corporate, the VAT registration number of the client must be disclosed on the face of the invoice
Statutory Disallowances- Petrol- Food/Drink
Self Employed- Obliged to make returns- Prepare accounts for 12 month period- Details of income- Details of expenses (include VAT if not registered)- Income and expenditure accounts- Expense heads:
1. Law Library subscriptions2. Wages3. Rent4. Professional Indemnity Insurance5. Postage and Stationery6. Motor and Travel7. Accountancy8. Books and Periodicals9. Telephone10. Computer Costs11. Training12. Sundry13. Clothing
File date- 31 October/16 November if you file and pay online - Surcharge 5%/10%
Tax Payment- 31 October/16 November- Balance of previous year 2009- Preliminary Tax 2010- 100% / 90% Rule
Income €50,000
Tax Thereon €36,400 @ 20% €7,280€13,600 @ 41% €5,576PRSI @ 3% €1,500Health Levy @ 3.33% €1,665Income Levy @ 1.67% €835
€16,856Credits – Personal €1,830
- PSWT (Say) €2,000 _€3,830€13,026
Preliminary Tax Paid <31 October 2009> (€5,000)Balance due <31 October/16 November 2010> €8,026
Cash RequirementBalance of 2009 income tax €8,026Preliminary tax 2010 <100% of 2009> €13,026
€21,052
Tax relief is available in respect of contributions to a personal pension plan
In addition to pension contributions made in a tax year, you can elect to treat payments made in the period 1 January to 31 October/16 November following the end of tax year treated as paid in the tax year
Income on which pension contributions can be made is capped at €150,000
Level of relief depends on ageUp to 30 years 15%30 – 39 years 20%40 – 49 years 25%50 – 54 years 30%55 – 59 years 35%60 years or over 40%
Income €50,000Less Pension <€50,000 x 15%> €7,500Taxable €42,500Tax Thereon €36,400 @ 20% €7,280€6,100 @ 41% €2,501PRSI/Levies €4,000
€13,781Credits – Personal €1,830
- PSWT (Say) €2,000 _€3,830€9,951
Preliminary Tax Paid <31 October 2009> (€5,000)Balance due <31 October/16 November 2010> €4,951Cash RequirementBalance of 2009 income tax €4,951Preliminary tax 2010 <100% of 2009> €9,951Pension €7,500
€22,402Cash flow cost <€22,402 - €21,052> €1,350
Q. Can tax credits be carried forward if not used in any tax year?A. No.
Q. What is the best way of building a financial track record with a bank?A. Lodge all income receipts into the practice bank account
Adhere to bank facilities i.e. do not exceed imposed overdraft limitsEnsure tax affairs are up to datePrepare annual financial statementsLive within your means!
Q. What is the best way to keep a record of ingoing work?A. Maintain a work in progress listing. The main headings should be as follows:
ClientBilledCash receivedDate file openedDate file closed
Q. Can train fares be claimed as a business expense if you are on circuit?A. Yes.
Q. Can rent relief be claimed if you are not making any money or paying any taxes?
A. No.
Q. Can tax be claimed back if not earning?A. No. Tax can only be claimed back if you have paid tax in the first place.
Q. Can you claim the dole?A. We are told technically no as you are self employed. However, you can try. You
will be means tested with reference to your household income.
Practice Management – Taxation Patrick Hunt S.C.Distillery Building, 20th October, 2010
Books and Records
Separate practice bank accountExpenses listingsLosses forwardDebtor recordsAccounting packagesFee estimate lettersReminders – fee collection
VAT
Registration – Threshold €37,500ReturnsAudits
Income Tax
Registration – claims for back taxDeadlines:-
Preliminary tax for 2010 - 31st October, 2010 (15th November, 2010)Balance due for 2009 - 31st October, 2010 (15th November, 2010)Return for 2009 - 31st of October, 2010 (15th November, 2010)Pensions up to 30 -15% Net Relevant Earnings
30 to 39 - 20% Net Relevant Earnings40 to 49 - 25% Net Relevant Earnings
Cap €150,000 from 2009 onwards
Tax Clearance Certificates
Required in advance of doing public funded work – otherwise you wont be paidTemporary certification available
Withholding Tax
Must retain original certificate.Available for offset against relevant accounting period.
Revenue on Line Service (ROS)Apply for ROS access number/digital certificate.
