VAT question......do I have to pay it?

djivor

Hello
Revenue have been after me to do my tax returns from Nov 2007 up to the end of 2009 (this is the date I informed them that I closed my business)

After doing the returns I have noticed that the turnover was nowhere near the €35000 VAT threshold on products and €75000 VAT threshold on services.

The return adds up to about €500 for the period.

Can I retrospectively de-register for VAT for that period as I haven't reached anywhere near the thresholds making be eligible to make a VAT payment?

Revenue are saying I have to pay it but other business colleagues and telling me that I don't and that I can de-register by getting the correct form stamped in the revenue office.

If I can do this - what's the name of the form?

Any help would be great

dbran

Hi

You cannot retrospectively de-register for VAT. You can only do it going forward.

Kind Regards


Dbran

djivor

So.... how to you know that the next 2 month period you are deregistered for is not going to be a bumper month and you smash through the thresholds?

In other words how was I to know that 2008 was going to the bad for turn over? Was I to de-register at the start?

Are you saying reregister if you go above the threshold?

dbran

Hi

Exactly. Once you believe that you are going to go below the threshold you inform revenue that you want to deregister and they then confirm that you have deregistered from that date onwards. Once you believe that you need to register you inform revenue and get confirmation from them that this is so.

It is your responsibility to inform revenue of the change and you cant pick and choose unilaterally to register or deregister without revenue authorisation.

Remember the threshold is on an annual basis. So just because you have a bumper month or two does not necessarily mean that you will exceed the threshold at the end of the year. Likewise, just because you have a bad month does not mean you will still be below the threshold at the end of the year.


Kind Regards

dbran

Gardenman35

Any ideas re the following?
I was let go from a gov agency June 2009 however they gave me a contract for services and I registered as a sole trader to supply services similar to those I provided whilst in employment.
I invoice the company each month for a monthly salary e.g. €2500 and they agreed to reimburse me for out of pocket expenses and travel at Travel and Subsistence rates comparable to those I recieved in the gov agency i.e. 0.41 cents per KM plus vouched receipts e.g hotel/meals.
Problem - For numerous months I was advised to submit an invoice along the lines of salary + T&S + VAT on total of this. I pay my VAT every 2 months. I think I have made a huge mistake here by charging VAT on the T&S component which probably should have been excluded and treated as out of pocket reimbursal of expenses. Inuding these and charging VAT on these will give the appearance of additional income and result in higher tax which I will have to pay?
Can you advise?
Thanks J

dbran

Hi Gardenerman

From what I read of your situation I believe you were correct in charging VAT on the travel and subsistance as you did.

Page 71 of the VAT guide sets the general rule in determining the cost that VAT is chargeable on. This includes not only the charge for the goods or services supplied but incidental charges incurred by the supplier which are passed on to the customer. For example, a consultant’s expenses for providing a consultancy service might include his/her own professional fee, travel,hotel accommodation,postage & stationary,and photocopying.

Hope this helps.

dbran

Gardenman35

Thanks Dbran,

My concern however is that if you add the money I recieved as reimbursment to my monthly fee, the tax man will think I recieved more per month than I actually did i.e. up to 50% in some cases of the final figure I receieved was reimbursment of out of pocket expenses. If mr Taxman believes I was paid 5000 when in fact only 2500 was salary, he may insist I pay higher rate of tax on 4k and not 2.5k...if that makes sense? I am also slightly screwed as I have not been keeping petrol receipts as I never had to submit them when I was in public service but was simply reimbursed at public service rates.

dbran

Hi

Ah.... I see. But do you not have other means to prove you incurred the cost such as a copy of your credit card statements that show the payments for petrol etc. via credit card.

As a sole trader you cannot use the civil service rates as a method of calculating your m&T expenses payable to yourself. Only companies can do this.

So basically, if you have been charging the customer more for M&T then you have been actually spending then you may indeed have an additional income tax liability.

Kind Regards


dbran

Gardenman35

Thanks again...

My ex employer - agreed that they would reimburse me a la public service T&S rates....sounded perfect when I was being thrown out into the big bad world of self-employed. Considering I had to travel 660km each week to my place of work (Dub to Cork), I hope I will be able to claim some mileage even though I did not keep the diesel receipts. I have checked my credit card statements and unfortunately I paid some of the petrol in cash and some via credit card so ill have to haggle with the tax man for an average mileage allowance x 660km. Anything above this given to me by my ex-employer will probably be considered additional income....ahhh the joys of self-employment

mathepac

Gardenman35 wrote: »

... have to haggle with the tax man for an average mileage allowance ...

Based on your response, I don't think you understand what dbran posted above . "... As a sole trader you cannot use the civil service rates as a method of calculating your m&T expenses payable to yourself. Only companies can do this. ..."

The way it works is you keep track of your total annual motoring costs (fuel, servicing, tax, insurance, etc) and you charge your business pro rata based on business miles travelled as a % of total annual travel; this % is allowable against your tax. Similarly, the accommodation should be allowable.

It sounds like the allowances your employer is paying you will correctly be classified as income by Revenue and taxed accordingly.

Incidentally, based on what you describe, Revenue may not accept that you are a contractor at all, they may classify you as an employee. Have a look at this - http://www.revenue.ie/en/tax/rct/determining-the-correct-employment-status-of-a-worker.html

HTH

Gardenman35

Thanks mathepac,

I think I understand the point exactly....that I am not allowed to claim T&S rates comparable to public service if I am a private individual/sole trader.

The problem however I have to decipher is that in my ignorance, when I was "made" self-employed due to an embargo on public recruitment, my ex-employer offered to reimburse me at similar T&S rates as when I was employed. I know now from your helpful replies that I was never entitled to these rates and that it will be counted as extra income.

If the tax man does not view me as a contractor but as an employee as per http://www.revenue.ie/en/tax/rct/determining-the-correct-employment-status-of-a-worker.html. What would be the implications? Would this mean that if I am employed, that my "Employer" has to settle up with the taxman instead of me?!

Confused!...thanks...

dbran

Hi

It would be the employer's responsibility and nothing to do with you.

Kind regards

dbran