Setting up as a Self
Employed Person



Joe Harrington
JF Harrington & Co
Certified Public Accountants
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Introduction


18/05/2013
The purpose of the Discussion is to explore the
way in which a person can become registered
as self employed with the Revenue and the
Companies Office.
My name is Joe Harrington and I run a small
accountancy practice at Main Street Moate Co.
Westmeath. I have been doing that for the last
19 years
JF Harrington & Co Certified Public Accountants & Registered Auditors 090 6481906
email jfharrington@eircom.net
2
Topics for Discussion



Sole Trader V Limited Company
Partnership
Registering your Business

Revenue
CRO
Accounting Records to Be Mainatained
Audit Exemption for Limited Companies
What Can I Claim Against My Tax
Transferring from Sole Trader to Co
Filing Obligations with Revenue & CRO
Tax Rates & Bands







18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906
email jfharrington@eircom.net
Topics for Discussion






PRSI & USC Rates
Revenue Audit Consequences
Implications of Employing Staff
Retiring from The Business
Appendices
Questions & Answers
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
4
Sole Trader V Limited Company






18/05/2013
Tax Issues
Limited Liability
To Have a Company you must have 2 people
Getting Money out of Company
Your Information is on Public File
Additional Fees With Company
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
5
Sole Trader V Limited Company




If a company commences trading there will be
no corporation tax for the first 3 years
Corporation Tax is paid on Profits after Directors
Drawings at 12.5%
In Sole Trader Situation the tax is on profits
before drawings
25% Corporation tax on Rental income &
Investment Income
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Partnership




Very Similar to a Sole Trader
You also need to have 2 people to set a partnership up
You need to register the Partnership with the CRO and
Revenue as soon as possible
You also should have a partnership agreement drawn
up as soon as possible and have it done by a solicitor
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Registering Your Business





18/05/2013
Sole Trader or Company you must register your
business with the Revenue at the outset
In a sole trader situation you complete a form TR1 to
register for all Taxes
The same Form is used for a partnership
In a Limited company situation you complete a Form
TR2 to register for all taxes
If a sole trader or partnership is trading or trades
under a business name you must
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Registering Your Business





Register it with the CRO by a completing a Form RBN1
Limted Company you must register with the CRO
Once you decide on a name and it is available nobody
else can use that name
In a company you must have 2 people to set up.
You can own 100% of the shares therefore a single
member company
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
9
Registering Your Business




With a Limited Company you complete a Form
A1
The Memondum & Articles of Association will
then be issued
Certifiacte of Incorporation
Company Seal
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Transferring from a Sole Trader to
a Company




Most Common for a business after trading for a few years
Possible Tax Implications for the sole trader
If property involved normally a lease drawn up between
company and sole trader
All other assets transferred at tax written down value and
set up in the companies accounts as a directors loan
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
What can I Claim Against Tax




Any expense wholly & exclusive necessary for your
business
In a limited Company situation you can claim travel &
subsistence based on civil service rates
You can only claim the above in the course of your
duties and not from home
Sole Trader/Partnership do your claim based on
invoices paid
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
12
What Can I Claim Against my
Tax



Medical Expenses that you incur and they are
allowed at 20%
Contributions to a Personal Pension are
deductible but are restricted dependant on your
age
In a company situation you can set up a
executive pension which is much more
generous to what you can put into it
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
What Can I Claim Against My
Tax



18/05/2013
Also it is a good way of getting money out of
your company tax free
Tuition Fees paid to Third Level Colleges
allowable at 20% up to a maximum of €2,500
for a full time course and €1,250 for a part time
one
Contributions for PHI are deductible against tax
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Accounting Records to be
Maintained

Basic Records that need to be maintained are
as follows:
Cash Book/Sales Book
 Cheque Payments Book
 Purchases Listing
 Debtors/Creditors Ledger


18/05/2013
Records can be maintained manually or on
computer
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Accounting Records to be
Maintained



18/05/2013
They can be maintained on excel spreadsheet
Various Tailored Made Accounts Package
such as Sage Line 50 big red book etc
Records must be maintained for a period of 6
years
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Audit Exemption




A Significant Relief for Companies
If you qualify you don’t have to get your
accounts audited by a independent auditor
Significant saving on Fees
To Qualify you have to satisfy the following
conditions:

18/05/2013
Turnover less than €8.8m
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Audit Exemption





18/05/2013
Balance Sheet less than €4.4m
Less Than 50 people Employed
Accounts & Filing Requirements up to date
Not available to Companies Limited by
guarantee
Not Available to Group Companies
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Filing Obligations with Revenue
& CRO



18/05/2013
As a sole trader or partnership no filing
requirements with CRO
As a sole Trader you have to file your tax
return by the 31st October each year
You must pay the balance ofyour tax for the
current year and pay preliminary tax for the
next year at that date also
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Filing Obligations with Revenue
& CRO



18/05/2013
With a Company you must file your CT1 with
the revenue 8 months and 23 days after year
end
Preliminary Tax due at the end of month 11 of
your accounting period
Company Accounts and B1 has to be filed with
CRO 9 months after year end
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Filing Obligations with Revenue
& CRO



18/05/2013
In a commencement situation the company
has to file a B1 6 months after incorporartion
Vat Returns have to be filed every 2 months
PAYE/PRSI returns every month
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Tax Rates & Bands




18/05/2013
Cut off Point The amount you can earn
before you pay 41% tax
€32,800 for a Single Person
€41,800 for a Married Couple With One
Income
The €41,800 can be increased by a further
€23,800 if both are working
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Tax Rates & Bands






18/05/2013
Single Tax Credit €1,650
Married Tax Credit €3,300
PAYE Credit €1,650
Self Employed People Not Entitled to PAYE
Credit
There is Marginal Releif and Single PAYE
Worker can earn €18,000 before pay Tax
Married PAYE €36.000
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Tax Credit & Bands


Self Employed these figures are halved
2 Tax Rates 20% & 41%
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
PRSI & USC Rates



Self Employed Pay an S Stamp which is 4% on
their income less Capital Allowances
There is a minimum contribution of €500 if your
income is more than €5,000
This stamp doesn’t entitle you to anything other
than a contributory pension
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
PRSI & USC Rates






18/05/2013
If Income less than €10,036 no USC payable
2% on the first €10,036
4% on the next €5,980
7% on Balance
If you earn over €100,000 you pay 10%
Calculated on Income less capital allowances
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Revenue Audit & Consequences




18/05/2013
When self employed you maybe subject to a revenue
audit
Revenue come & Inspect your books and if not happy
they will look for additional tax
As well as additional tax they will charged interest and
penalties
Penalties can vary from 10% to 100% depending on
the seriousness of the error
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Revenue Audit & Consequences



18/05/2013
If Settlement Exceeds €33,000 to include
interest and penalties it will be published in the
papers
Before audit commences if you make a
voluntary disclosure you will save on penalties
and non publication
If not happy with Revenue you can appeal their
decision to appeal commissioner and circuit
court etc.
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Employing Staff




18/05/2013
You must register as employer
You will have to register each employee as
working for your company
Liable to pay ER PRSI on their gross wages
which varies. Gross Wage up €356 is 4.25%
and thereafter 10.75%
Pay them for All Public Holidays
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Employing Staff




Pay them all their Holiday Entitlements
Once they are more than 2 years working they are
covered by the unfair dismissal act
Once they are with you 2 years they are entitled to
Redundancy which is now fully payable by employer;
up to 2012 there was a rebate of 15% and prior to that it
was 60%
Once you take on someone ensure that you get a
Terms & Conditions Employment Contract signed asap
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Retiring from the Business




Any Property or Goodwill will be liable for capital gains
tax due at 33%
However if you are in business for 10 years and you are
over 55 you can claim retirement relief up to the value of
€750,000 between the age of 55 to 66 outside the family
This reduced to €500,000 for over 66
If you dispose or transfer to your family member there
is no limit on the amount provided between the age of
55 to 66 and the family member must work in the
business for the previous 5 years
18/05/2013
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Retiring from Business

18/05/2013
If you sell or transfer to family after 66 there is
a limit set at €3,000,000
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
Appendices







18/05/2013
TR1 Tax Registiration Form for Sole Trader
TR2 Tax Registration for Company
Flate Rates Expenses
RBN1 to Register Business Name for Sole
Trader
Form A1 to Incorporate Company
Travel & Subsistence
Tax Rates & Bands
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net
33
Questions & Answers

18/05/2013
Any Questions?
JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email jfharrington@eircom.net