New Business Query

Johnnnybravo

Hi All,

I have a good few queries here so please bear with me.

My new business basically is that I source DJ`s for pubs and clubs, I am a DJ myself also.As things stand at the moment I have one major client that have djs in 7 nights a week, the score is that I do 3 of the nights myself and contract out the other 4 but the guy that owns this club pays me for the 7 nights and I then pay the guys I contract nights out to.

Basically I am wondering is this worth my while? From a tax point of view, I assume that I can minus what I pay these guys from the money I receive at the end of the year to come up with my Income tax payable amount, my major issue is from a tax point of view as I dont want to pay tax on money I receieved just to pay out to others.

Also I expect to pull in 50k a year. Do I need to register for VAT? I had heard somewhere that if I had an income under the 70k mark that I did not need to register for VAT.

I am totally new to all this and any help at all would be grateful appreciated.

dbran

Hi Johnnnybravo

You are correct in that the amount you pay out to the other DJs will be allowable as a deduction against your taxable profits.

You will need to make sure that they are treated as self employed and not employees so make sure at the very least they provide you with invoices for the work they are doing. You may even want to set up standard contracts to set out the relationship that they have with you regarding the service that they provide. For example they are responsible for providing their own material and equipment, etc.

As regards VAT, if your turnover is over €37500 you need to register for VAT. As you are invoicing people who are most likely VAT registered this should not be a problem as they will just simple claim back the VAT you charge them. You willalso be able to recalim the VAT you pay on your purchases.

Hope this helps


Regards


David Branigan

cannns

Johnnnybravo wrote: »

Hi All,

I have a good few queries here so please bear with me.

My new business basically is that I source DJ`s for pubs and clubs, I am a DJ myself also.As things stand at the moment I have one major client that have djs in 7 nights a week, the score is that I do 3 of the nights myself and contract out the other 4 but the guy that owns this club pays me for the 7 nights and I then pay the guys I contract nights out to.

Basically I am wondering is this worth my while? From a tax point of view, I assume that I can minus what I pay these guys from the money I receive at the end of the year to come up with my Income tax payable amount, my major issue is from a tax point of view as I dont want to pay tax on money I receieved just to pay out to others.

Also I expect to pull in 50k a year. Do I need to register for VAT? I had heard somewhere that if I had an income under the 70k mark that I did not need to register for VAT.

I am totally new to all this and any help at all would be grateful appreciated.

First off on the VAT, the threshold for VAT on the sale of goods is 75k and VAT on the sale of services is 37.5k per annum. As your business is in the services industry, if your sales are to exceed 37.5k you are required to register for VAT.

It may be the case, that it could be some time before your business achieves the target of 50k sales per annum. If this is probable I would consider delaying your VAT registration. The bars/clubs which you provide your services to won't really be effected by you registering for VAT, however, if you were to provide DJ services to individuals, eg.. private parties, families, etc..they won’t be VAT registered and they will bear the cost. This in turn will either put you at a competitive disadvantage or your margin will suffer.

With regard to the deductibility of wage costs or third party costs, from what you have said they would be deductable expenses. Therefore you will be able to offset these costs against your revenues.

I would recommend that if you are using many of the same DJs repeatedly to put together, “Contracts For Service”, this can be simple, maybe one or two pages, pointing out their responsibilities and your responsibilities. One key point being, that they themselves are independent contractors and are responsible for their own tax affairs and not you.

I would recommend that you register for tax immediately, simply google “TR1 Revenue” and print out the form and follow the instructions.

Lastly if you have a business name or even if you are trading under your own name I would register the name. It’s pretty straight forward.

Johnnnybravo

Thats great advice lads, thanks a million for yere help. I really appreciate it.

Just to let ye know I was a PAYE employee up til the end of May this year and I doubt I will hit 30k before december as a sole trader. Would I be best off then to hold off until next January to register for vat and then I could give new 2010 rates to the clubs with the vat on them. For me it seems simpler than now changing the rates agreed to the clubs and hoping they will be ok with the increase or else loosing out on income myself by having to call the agreed rates vat inclusive and pay the vat element to the revenue. If I can hold off til Jan with the vat registering that would be a load off.

Any suggestions?

dbran

Hi

Once you think your annual turnover is going to go over €37500 you need to register. It is not dependant on the calender or tax year but your own accounting year from when you commenced to trade.

If you think you will need to register you are better off doing so. The client will claim back the VAT on his VAT return so it is not a cost to him. And you will be able to claim back the VAT you pay over to suppliers, so you will save on your costs.

Regards

David Branigan