Sole Trader - forgot to pay preliminary tax in the first year (2011)

Stabshauptmann

I've a question for you. My friend set up a business in July 2011 but didnt pay any preliminary tax last year.

He misunderstood a piece of revenue guidance that said tax returns for years 1 & 2 would not need to be submitted until 31 October 2013 - but he still should have paid preliminary tax in 2011 and 2012 for those years, right? Probably a form he should have submitted even if it was a nil tax year?

He hasnt made a profit yet - all profits fully reinvested in stock, my question is, is he going to get in trouble / fined by Revenue for not submitting any return in 2011?

What is the best course of action now?

KCTK

Stabshauptmann wrote: »

I've a question for you. My friend set up a business in July 2011 but didnt pay any preliminary tax last year.

He misunderstood a piece of revenue guidance that said tax returns for years 1 & 2 would not need to be submitted until 31 October 2013 - but he still should have paid preliminary tax in 2011 and 2012 for those years, right? Probably a form he should have submitted even if it was a nil tax year?

He hasnt made a profit yet - all profits fully reinvested in stock, my question is, is he going to get in trouble / fined by Revenue for not submitting any return in 2011?

What is the best course of action now?

If he only set up in 2011 then there was no preliminary tax to be paid last October. Preliminary tax is 90% of current year lliability or 100% of previous year, as he had zero (no business) in 2010 then 100% of zero means no preliminary tax in 2011. Will have final tax for 2011 and preliminary tax for 2012 to calculate and pay this October (if any)

Stabshauptmann

Thank you

Alan Shore

KCTK wrote: »

If he only set up in 2011 then there was no preliminary tax to be paid last October. Preliminary tax is 90% of current year lliability or 100% of previous year, as he had zero (no business) in 2010 then 100% of zero means no preliminary tax in 2011. Will have final tax for 2011 and preliminary tax for 2012 to calculate and pay this October (if any)

While you are 100% correct the taxpayer should file a NIL notice of Preliminary Tax by the due date. Failure to do so will result in the Balance of tax falling due on 31 October 2011, interest may apply for late payment.

KCTK

Alan Shore wrote: »

While you are 100% correct the taxpayer should file a NIL notice of Preliminary Tax by the due date. Failure to do so will result in the Balance of tax falling due on 31 October 2011, interest may apply for late payment.

Was this not only with the old paper returns? Never seen an option in ROS to file a NIL preliminary tax return?

Stabshauptmann

Can I ask some more questions.

I think that if he files before 31 August revenue will calc tax liability, but he wont get a chance to do that so more than likely I'll be helping him calculate his liability.

Am I right in thinking the following:
If no other income,
(Single person tax credit, 1,650/20%) = €8,250 exempt from Income tax.
If earnings are below €4,000 there won't be any PRSI Class S, or USC either.

But if there was some PAYE income, say 10,000
Can I use the remaining portion of the single person tax credit (1,350 I think) against the income from their business?
Or does the credit have to be used against one particular type of income?

I presume all the business income is then subject to PRSI and USC as his total income will exceed the thresholds?