First time self-assessment question

whatawaster

Quick clarification needed if possible.

My brother started up as a sole trader in August 2009.

Assuming his year runs from 1 August 2009 to 31 July 2010, does this mean that he needs to file his first income tax return by October 2011, and doesn't need to pay preliminary tax before then?

I'm mainly querying whether or not he has any duty to file or pay anything by this October's deadline? Having read the revenue guides i'm not 100% sure, but don't think he does.

Thanks in advance.

Nicliam

Yes you do. But normally Revenue allow you to apportion the year (so that you are paying tax on the earnings for August to December inclusive). The Income Tax return to be filed this year is for all the money you earned in the calender year 2009. Hope this is clear, but in any case, give the Revenue Office that deals with him a call - they are quite helpful in telling you how to complete the return or alternatively get the advice of an accountant as many people who are inexperienced, often don't claim all the tax credits that they are entitled to, or the expenses that were incurred in relation to the business.

Hope that helps

whatawaster

Thanks for the reply.

This - http://www.revenue.ie/en/tax/it/leaflets/it10.html#section2 is confusing me

An individual, who enters the self-assessment system because they have commenced in trading, have until the return filing date for the second year to submit tax returns for both the first and second year trading. However, as mentioned previously, early filing of returns is advisable, as it allows an individual to know in advance of payment deadlines what tax is due.

However, if you commenced as a self-employed person in 2008 you must, under the Pay & File system:

* pay Preliminary Tax for 2008 on or before 31 October 2008,
* pay the balance of Income Tax due, if any, for 2008 on or before 31 October 2009,
* pay Preliminary Tax for 2009 on or before 31 October 2009,
* pay the balance of Income Tax due for 2009 on or before 31 October 2010,
* file your tax return for 2008 and 2009 on or before 31 October 2010.

Does this mean the tax has to be paid, but the returns don't need to be filed?

dbran

Hi

Basically you not got a requirement to file the 2009 income tax return until October 2011 and a late filing surcharge will not be levied on the first years return.

However you do have an obligation to pay the tax due, both preliminary and final balance by 31 October 2010 and if you have ultimately underpaid any of the amounts, interest will be due and payable on the underpaid amount back to October 2010.

I would file a return in October 2010 or a soon as possible afterwards so that you are in the self employed regime before the penalties start tobecome important.

Hope this helps.


dbran

whatawaster

dbran wrote: »

Hi

Basically you not got a requirement to file the 2009 income tax return until October 2011 and a late filing surcharge will not be levied on the first years return.

However you do have an obligation to pay the tax due, both preliminary and final balance by 31 October 2010 and if you have ultimately underpaid any of the amounts, interest will be due and payable on the underpaid amount back to October 2010.

I would file a return in October 2010 or a soon as possible afterwards so that you are in the self employed regime before the penalties start tobecome important.

Hope this helps.


dbran

thanks,

Just so i'm clear

- we could take his year-end as being 31st December each year
- tax on income from 1 July 2009 (start of trading) to 31 December 2009 is due in October
- Pay preliminary tax for the year 1st January 2010 to 31 December 2010 (take 100% again of 2009 income) in October also.

Is the above correct?

dbran

Yes. Correct.

LilyBeans

Sorry if I wear out anybody's patience with what is probably quite clear to most of you, but the Irish tax system is completely new to me, and I'm trying to learn.

Thanks, OP, for starting this thread, because I had the same question.

So, if I'm understanding this correctly, there are two things that a self-employed person must do here with regard to income tax:

Pay preliminary tax by October 31st
File an actual return after December 31st

Is that right?

How do you estimate what your tax obligations will be, and what happens if you pay too much or too little?

Thanks:D