Almost in trouble over tax issues

experiMental

Hello,

Two weeks ago, I've got an offer of a part-time job after being on welfare. Then yesterday, the part-time job turned into a full-time position. However, I was told to sign up as a sole trader until my salary will be reviewed in a months' time. I haven't been told what the arrangements will be afterwards, so I presume I should continue as a sole trader after the review.

I don't have much time to wait in the tax office because my hours are quite long. I also won't make enough money to hire an accountant to do my tax returns. I have already got a small payment from my part-time job, and I have logged it in my own computer and written a receipt.

As I'll be getting a payment every week, should I open a new bank account for my sole trader business? I'm currently lodging any income I've got into my current account. Is this allowed and should be avoided?

I would like to know how to approach running my own sole trader business so that it would be easy to audit and wouldn't create any problems or penalties for myself. I'm still in debt so I can't afford to pay for any slip-ups.

Thanks for your help and guidance!

Ickle Magoo

Moved from PI. :cool:

beeftotheheels

First things first. Whether you're actually a sole trader in this instance is questionable and is based on case law. I can't give you a definitive answer but the case law looks at things like the control you have over your hours/ timetable. The control you have over how you achieve a particular end. Who owns the equipment used. It doesn't matter what you call the relationship, the law looks to the realities of the relationship.

Here's a link to the Revenue website on it.

http://www.revenue.ie/en/tax/rct/determining-the-correct-employment-status-of-a-worker.html

We can't go into specifics here but if, for example, your "job" was working in a cafe, where you worked specific hours, wore a uniform, used the cafe equipment, had to serve apple pie in a particular way etc then chances are you'd be an employee.

If your "job" was designing a website where you set your own hours, used your own computer, had great flexibility as to how you achieved the end result, then chances are you might be self employed.

If you're an employee then the tax risk associated with not operating PAYE properly rests with your employer.

If you're self employed then the risk rests with you.

Your employer would probably prefer that you were self employed. You'd probably prefer to be an employee. If there's doubt as to the relationship e.g. if you seem to fall squarely within employee per the Revenue guidelines but your employer won't continue the relationship if that's the case, then you could always suggest altering the relationship per the Revenue guidelines to make it clearer that you're self employed

If you keep decent books and records that's sufficient for Revenue. You don't have to have an accountant, you don't need a separate bank account although it might make your record keeping easier.

The records need to be sufficient for Revenue to be able to assess that they're getting a fair view of the business but that could be in a computer program, or simply in a big copybook with receipts stapled to each page.

barneystinson

A good summary of the issue from the previous poster, but just one issue regarding the "tax risk" of non-operation of PAYE: the PAYE regulations do allow that in a case where an employee is aware that the statutory deductions weren't being made, Revenue can seek to collect the tax from the employee.

So, if you and your employer end up arguing with Revenue as to whether or not it's an employment, the burden of tax could still fall on you. But in that case you probably wouldn't actually be any worse than as a sole trader anyway.

Shane732

I'll leave this thread open for the moment. Please read the charter though in relation to what the forum should and shouldn't be used for.