Earlier today, I had a conversation with two friends, an accountant, and an owner-manager. The owner-manager commented on the rush of the tax season being over for this year. We got to talk about how some clients lose money through their actions or inactions. I think it would be useful to post some of the learning points about the tax season here in the hope that others can learn from them

Leaving things until it’s too late

This is a problem with a few clients. We manage to get the tax return in but we don’t have the time to do a proper review of all the numbers. In some cases, we may not claim tax credits or reliefs because the client has left themselves with not enough time to pull out the relevant information. In one case, the client would have made provision for a pension payment and minimised their tax bill had they realised earlier what the final tax situation would be.

Not claiming all tax credits

There are a couple of tax credits that not everyone fully avails of. The main one here is medical expenses. The relief is worth 20% of the value of the medical expenses incurred, but not reimbursed elsewhere. The client just needs to make sure they get and retain the receipt. I recommend that clients pay by laser or credit card, if possible, so the payment is recorded on a bank/cc statement and is readily available.

People in employment not claiming all occupation specific tax credits

Often, a self-employed person is married to an employed person, and the partner’s employment earnings have to be returned on the self-employed person’s tax return. We have found that not all employees are aware of and claim all of their tax credits. For example, certain occupations such as nurses, teachers, college lecturers have occupation specific tax credits. These are often negotiated with the tax office by a trade union and are available to all persons carrying out the specific occupation. An up-to-date list can be found here For example, a nurse who is obliged to supply and launder his/her own uniform can claim € 733 as deductible expenses – at 20% this is worth € 146 per annum.

Failing to keep your tax credit allocations up to date.

We have seen situations where a client had allocated some of his tax credits to another part-time employment which he had since left. However he did not tell the tax office, and they kept allocating tax credits to that employment. The effect of this is that he was not getting those tax credits. We discovered this after four years and he got a four figure rebate. However, if it had gone over 4 years he would have lost his ability to claim the credit.

As always, if you have questions or comments feel free to email jim(at)accountsplus(dot)ie.

Income Tax Returns for 2009 must be filed by 31 October 2010. Failure to file on time will lead to surcharges. Here are tax tips that can definitely help you.

The way our system works, we pay a preliminary Income Tax for 2010 on 31 Oct 2010 and we file the actual return for 2010 in 2011 and at that time, we balance up for any over/underpayments. 31 Oct 2010 is the latest date for filing for 2009- if you had an overpayment for 2009 you could file early in order to get the repayment earlier.

Note that if you are filing on ROS you get an extension until 16 November. To avail of this deadline, both the Return and the Payment must be made online. Where only one of these actions is completed through ROS, the extension will not apply.

The preliminary tax paid must be 90% of the actual liability for 2010 or 100% of the tax bill of the 2009’s tax bill (excluding some items).

Any balance of tax due for 2010 must be paid by 31 October 2011 (2009 balance falling due by 31 October 2010).

Tip: If profits are down in 2010 on 2009, as they are for many, it may be worth while paying on the estimated 2010 profits. You would want to be confident of your estimates.

Tip: You can make pension contributions for 2009 up to 31 October 2010. In this way pension contributions made up to31 October 2010 will reduce your tax liability for 2009. The maximum tax effective contribution ranges from 15% of net relevant earnings for persons under 30 years of age to 40% of earnings for persons aged 60 or over. This is subject to an overall deemed earnings cap of €150,000 in 2009.

Tip: Check that you are utilising all available credits. These include medical insurance credits, local authority service charges, employment specific (employees only), certain charitable contributions, certain school payments, certain college fees. You would be surprised at how many tax payers ignore these

Tip: Make sure also that, where possible, you utilise the low tax band as effectively as possible.

Tip: Note in particular that taxpayers are entitled to make a back year claim for up to 4 years for reliefs due but not claimed.

This is very much summary information. It should not be used as a definitive guideline. You should take advice from a qualified advisor before making any significant decisions. Here is another article that can help you improve your taxes.

As always, if you have any comments or questions please email me – jim (at) accountsplus (dot) ie.

I have had a couple of questions recently about how Kashflow handles VAT. Users do not seem to fully understand the use of the “submit VAT” button. So here is a brief overview of what needs to be done to have accurate VAT reporting.

When you first submit a VAT report, it is important that you make sure that your submission agrees with the relevant VAT management report in Kashflow. If your VAT submission for Jan Feb 10 says VAT on sales 5000, VAT on purchases 3000 then these numbers should agree to the relevant figures on the VAT Management Report for the same period. If they don’t agree, you need to understand why. Either the VAT submission is wrong or Kashflow is wrong. I recommend that you check the Kashflow report, making any amendments necessary, and make a submission that ties back to Kashflow.

Once you have the submission made you run the VAT management report which agrees with the submission and hit “Submit VAT” button. This does not actually submit anything. It effectively tells Kashflow that all the transactions on the report have been reported to the VAT authorities.

When you run the VAT Management report for the following period, it will pick up all transactions for that period but it will also pick up any transactions in earlier periods that have not been reported (submitted) to the VAT authorities. For example, if in late April, a Purchase invoice dated February comes in with VAT of € 1000, we cannot add it to the Jan Feb return which was already submitted. Kashflow knows that it was not submitted because it was not on the report which you marked submitted. Therefore, it will be brought forward and added to the Mar Apr report. When you download the detail for the report you will see a transaction in there with a February date.

It is important then that when making a vat return the return should agree with the VAT Management report for the same period and that you hit the “Submit VAT” button to let the system know that all transactions on that report have been submitted. Here are 8 things you need to know about VAT

If you have any questions on this, or any other aspect of Kashflow, feel free to give me a call or email me on jim (at) accountsplus (dot) ie.

In a recent tax briefing document, Revenue have promised to continue to focus on the issue of employed v self-employed across a multiplicity of sectors for the foreseeable future. Right now, they are focussing on locums in medicine, healthcare and pharmacy. The move is part of an overall strategy by the Revenue to bring more workers into the PAYE net.

Here is the ebriefing document is here

If you have individuals working for you on a self-employed basis it is important for you to consider whether these are really self employed or employees. The Revenue could consider you liable for PAYE/PRSI on any payments to them.

Your starting point should be the Code of Practice for Determining Employment or Self-employment Status of Individuals.

From the ebrief:

“This is not a Revenue Code of Practice. It has its origins in the Employment Status Group (set up under the Programme for Prosperity and Fairness) which sought to provide clarity as to whether, in relation to an engagement, an individual is employed or self-employed. As outlined in the Code, “that group was set up because of a growing concern that there may be increasing numbers of individuals categorised as ‘self employed’ when the ‘indicators’ may be that ‘employee’ status is more appropriate”.The Code of Practice was updated in 2007.