Income Tax Returns 2012

leanne249

Hi guys, I hope someone can help me. I am filing income tax returns Form 11S(short version as he only registered as self-employed in September 2012) for my husband and have a bit of dilemma. Ok so in line 121 asks for GROSS INCOME(sales/receipt) and then it follows TOTAL Expenses. My query is GROSS INCOME is it after direct materials like for example : he is a handyman so to do his job he needs to buy materials and then when he charge clients the receipt includes labor and materials altogether. Total expenses in my understanding that would be car running cost, phone and etc.
I emailed to revenue and answer I received :” your gross income is all income before expenses and deductions.” Which doesn’t really make sense why he should pay tax and Universal charge on Gross income based on receipt which includes materials.
Not really sure does it make sense what I am writing but please can you advise me what would appropriate solution for this?

PS. I found online about USC:
” 3.2 I am self-employed – how do I calculate gross income for the purposes of the Universal Social Charge?
Gross income is determined after deduction of legitimate expenses directly associated with the performance of the trade. This is in accordance with the normal principles of commercial accounting.
3.3 Can expenses be deducted?
Legitimate revenue expenses directly associated with the performance of the trade can be deducted in calculating the taxable profit figure upon which the Universal Social Charge is chargeable”

Thank you

hjr

He's not paying tax on his gross income, he's paying tax on his net profits, less any capital allowances he may have.

It would seem best at this point to engage an accountant. Taxation and Revenue are specialist areas and its not advisable to make guesses on this based on advice received here. Hope that doesn't sound harsh, but Revenue don't accept lack of knowledge as a reason if you undeclare income or tax.

just my 2 cents!

leanne249

Thanks for your reply. I don't intend undeclare income I am just confused why income would include direct materials to make that sale??? i.e paint room (paint cost lets say €80 and labor €100) so why €180 would be considered as income and not 100???

I understand that tax are payable on net income but I am more concerned about USC and PRSI which is payable on GROSS INCOME

barneystinson

leanne249 wrote: »

Thanks for your reply. I don't intend undeclare income I am just confused why income would include direct materials to make that sale??? i.e paint room (paint cost lets say €80 and labor €100) so why €180 would be considered as income and not 100???

I understand that tax are payable on net income but I am more concerned about USC and PRSI which is payable on GROSS INCOME

USC is paid on Gross Income for USC purposes, as defined by the relevant section of the Tax Consolidation Act. It means income from various sources (of which a trade carried on by the taxpayer might be just one), with/without allowing for certain deductions.

This is NOT the same Gross Income as they want in relation to your husband's trade income. They want to know the total amount of his sales, ie the total amount he invoiced (plus the value of his uninvoiced Work-in-progress at year-end).

EDIT: By the way, I haven't seen the form but I presume the Panels you're asking about are in the Section called "Extracts from Accounts" or similar...? This means you are simply giving them supporting figures from the accounts - they don't/won't directly affect the amount of tax owed.

However, if you enter completely off-the-wall figures there, you drastically increase the likelihood of them querying/auditing the return. Consider an example:

Your husband invoices out 100k net during the year, and charges 13.5k VAT.
He declares this 13.5k of VAT on his sales, and also claims back 10k of VAT on his materials & overheads.
In his income tax return you state that his sales per accounts was only 60k (being 100k less 40k of materials).
Now, since his VAT returns would suggest he had 100k of income, it looks to Revenues computer system as though he has under declared his income by 40k, even though he hasn't... so the chances of a query increase hugely.