Financial Management
Sharon O’ Connor,Director – FGS Audit & Advisory
Declan O'Hanlon,Partner – FGS TaxationThis slide presentation is for guidance purposes only and should not be relied upon as being
sufficient in specific circumstances.
Maintenance of Practice Books and Records
Sharon O’ Connor, Director – FGS Audit & Advisory
Open a Bank Account
� 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 Recognition
� 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 invoice is issued
Sample Sales Invoice
FGS Date: 01/01/2009Molyneux House Fee Note No 1Bride Street VAT No. IE………………Dublin 8
FEE NOTE________________________________________________________________________________________
Description Vat Rate €
Fee for professional services rendered 21.5% 3,000.00
Outlay 0% 10.00
VAT Rate Total Net Total VAT21.5% 3,000.00 630.00 Total Net Amount 3,010.000% 10.00 0.00 Total VAT Amount 645.00
________TOTAL DUE 3,655.00
________
What is an expense?
• 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
VAT Returns & Due Dates
� A bi-monthly VAT return is due to be lodged with Revenue and any liability due paid by 19th of following month, i.e. Jan/Feb ’09 VAT return is due by 19 March 2009
� 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
Maintenance of Books & Records
� 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
Schedule of Sales Invoices
107.50500607.50004B Byrne31/01/09
26.55123.45150002S Smith12/01/09
198.55923.451,122TOTAL
43200243003S Flynn22/01/09
21.5100121.5001Joe Bloggs
05/01/09
VatNetGrossInvoice No
DetailsDate
Schedule of Purchases Invoices
35075.25350422.254Eircom21/01/09
200432002432Law Library
02/01/09
200600172800969TOTAL
15032.25150182.253Vodafone10/01/09
10021.5100121.51Eircom01/01/09
Law Library
PhoneVatNetGrossInvoice No
DetailsDate
Bank Analysis - Lodgements
4545n/aEircom refund
15/01/09
15032.25182.25002S Smith12/01/09
10,00010,000n/aCapital Introduced
10/01/09
4525053.7510,00010,348.75TOTAL
10021.50121.50001Joe Bloggs05/01/09
SundrySalesVATCapital Introduced
TotalInvoice number
DetailsDate
Cheque Payments & Direct Debits
1,0001,000n/aDrawings –self
15/01/09
1,0002,000302.503,121TOTAL
181.50181.503Vodafone12/01/09
1211211Eircom10/01/09
Drawings
Sundry
Revenue re VAT
Trade Creditors
TotalInvoice Number
DetailsDate
Sample VAT Return
Amount of Payment
.000T3
or Excess of T2 over T1 (Repayable)
.00411T4
Excess of T1 over T2 (Payable)
1 6
5
0
8
4
.00T2
VAT on Purchases
.00
.00T1
VAT on Sales
Year end requirements
� 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
Value Added Tax
� 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
� Accounting for VAT- Cash receipts basis- Rates of VAT 21.5% and 0%- Purchase Input credits
Value Added Tax cont’.
� UK and foreign clients – If billing a non tax registered individual the VAT rate is 21.5%
� 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
Income Tax
� 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 subscriptions
2. Wages
3. Rent
4. Professional Indemnity Insurance
5. Postage and Stationery
6. Motor and Travel
7. Accountancy
8. Books and Periodicals
9. Telephone
10. Computer Costs
11. Training
12. Sundry
13. Clothing
Return of Income
� File date
- 31 October
- Surcharge 5%/10%
� Tax Payment
- 31 October
- Balance of previous year 2008
- Preliminary Tax 2009
- 100% / 90% Rule
- Need to adjust payment upwards to factor in new income levy if basing payment on 100% of 2008
Income Tax Computation 2008
Income €50,000
Tax Thereon
€35,400 @ 20% €7,080
€14,600 @ 41% €5,986
PRSI @ 5% € 2,500
€15,566
Credits – Personal €1,830
- PSWT (Say) €2,000 €3,830
€11,736
Preliminary Tax Paid <31 October 2008> (€5,000)
Balance Due <31 October 2009> €6, 736
Frequently Asked Questions
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 limits
Ensure tax affairs are up to date
Prepare annual financial statements
Live 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:
� Client
� Billed
� Cash received
� Date file opened
� Date file closed
Frequently Asked Questions
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 and to the extent that it has been paid already.
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.
Thank You
Sharon O’ Connor, Director - FGS Audit & Advisory Declan O'Hanlon, Partner – FGS Taxation