PAYE & Farm Profits - Tax Advice!

Seaba

Hi All,

I know there is a thread on preparing farm accounts etc but I did not want to hijack it with my query, which is..

I am married with 3 kids. Working as a training contractor (3-6 months contracts). I get paid through the books of the different companies I work for so I pay some PAYE along with USC, PRSI. I also have the farm (poisoned chalice) in my name - Dad transferred it to me years ago so he could get the max state pension (himself and Mam get about €432 a week in total at the moment).

The trouble is I went into the accountant this week to do the taxes:
My Earnings = €32,000 approx
Wifes self employed earnings = €4,000 (will grow to €10,000 2014)
Rental income from wifes house (which has a mortgage on it) = €6,000 (less a few quid for legit expenses)
= €42,000 approx

If I did not have the farm I would be paying PAYE of approx €2,000

However....
When the €18,000 for farm profits come in it all gets hit at 41%
Which means that the tax bill this year came to €2,000 for myself and the wifes earnings, and €7,500 approx for the farm = €9,500!!
In fairness the tax on the farm portion will come out of the farm bank account we have so it won't be directly out of my pocket (Dad does most work on the farm anyway)

I know a bit about payroll/taxes etc so I was wondering what is the best way to reduce my tax liability? I don't mind doing a bit of paperwork to "get around" this. I will also ask the accountant.
However I just wanted to get a 2nd/3rd opinion as I know there are are few posters on here who are knowledgeable in this area.

Thanks in advance for any advice.

Mac Taylor

Seaba wrote: »

Hi All,

I know there is a thread on preparing farm accounts etc but I did not want to hijack it with my query, which is..

I am married with 3 kids. Working as a training contractor (3-6 months contracts). I get paid through the books of the different companies I work for so I pay some PAYE along with USC, PRSI. I also have the farm (poisoned chalice) in my name - Dad transferred it to me years ago so he could get the max state pension (himself and Mam get about €432 a week in total at the moment).

The trouble is I went into the accountant this week to do the taxes:
My Earnings = €32,000 approx
Wifes self employed earnings = €4,000 (will grow to €10,000 2014)
Rental income from wifes house (which has a mortgage on it) = €6,000 (less a few quid for legit expenses)
= €42,000 approx

If I did not have the farm I would be paying PAYE of approx €2,000

However....
When the €18,000 for farm profits come in it all gets hit at 41%
Which means that the tax bill this year came to €2,000 for myself and the wifes earnings, and €7,500 approx for the farm = €9,500!!
In fairness the tax on the farm portion will come out of the farm bank account we have so it won't be directly out of my pocket (Dad does most work on the farm anyway)

I know a bit about payroll/taxes etc so I was wondering what is the best way to reduce my tax liability? I don't mind doing a bit of paperwork to "get around" this. I will also ask the accountant.
However I just wanted to get a 2nd/3rd opinion as I know there are are few posters on here who are knowledgeable in this area.


Thanks in advance for any advice.

Seaba, the best advice, I can give you is to get a good accountant (fees are allowable against tax). There are so many variables that it would be almost impossible to give advice that would make sense.

lakill Farm

maybe put the kids on payroll?

Seaba

Mac Taylor wrote: »

Seaba, the best advice, I can give you is to get a good accountant (fees are allowable against tax). There are so many variables that it would be almost impossible to give advice that would make sense.

Thanks, yes I definitely will.
The main issue is that myself and the wifes earnings are bringing me up to our cutoff - €41,800, which is taxed at 20%. The farms profits are all over this figure and are taxed at 41%.

I was thinking of setting my work up as a private limited company (I know there is some paperwork involved) so my earnings would be taxed separately (corporation tax) and then that would mean the profits on the farm plus the wifes income would be less than 41,800 and therefore only taxed at 20%?!

viztopia

could you employ your father (he is doing work anyway). with his tax credits he could earn up to €10k more without having to pay any paye. you would only be looking at usc, prsi and er prsi

Count Mondego

viztopia wrote: »

could you employ your father (he is doing work anyway). with his tax credits he could earn up to €10k more without having to pay any paye. you would only be looking at usc, prsi and er prsi

Your parents can earn a combined 36k before being hit with deductions, so you need to know their retirement income in full. You will have to pay a bit of PRSI but well worth it I think in the long run.

Alan Shore

OP, I think you have a couple of wires crossed.

Your income is 32,000 your wife's is 10,000. The married standard rate band is 41,800 plus the second income.

So only half your farm income is taxed at the higher rate.

You are earning a good income from the farm because you have no labour costs. Can you include something for the kids?
Does your wife do any book keeping for the farm? Could you pay her a wage for that?
Is the land in joint names? Partnership.

€32k + 10k + 6k + 18k = 66k which you should be able to get in at the standard rate will a little effort.

Limited company maybe.

Seaba

Alan Shore wrote: »

OP, I think you have a couple of wires crossed.

Your income is 32,000 your wife's is 10,000. The married standard rate band is 41,800 plus the second income.

So only half your farm income is taxed at the higher rate.

You are earning a good income from the farm because you have no labour costs. Can you include something for the kids?
Does your wife do any book keeping for the farm? Could you pay her a wage for that?
Is the land in joint names? Partnership.

€32k + 10k + 6k + 18k = 66k which you should be able to get in at the standard rate will a little effort.

Limited company maybe.

You're right Alan, thanks - was in a bit of a rush typing the opening post.
Yes, €32,000 my income, plus €9,000 of the farm income to bring me up to married cut off of €41,800 approx, plus wifes income (up to €23,800) all at 20%. Rest of the money from the farm (9,000) at 41%.

The kids are too young to pay them anything (2, 3 and an 11 year old)
Wife helps to move cattle etc, no more, but no one knows that! so I could pay her something (she'll love that). As 2 previous posters mentioned I could definitely pay Dad something but I will have to take into account his state pension when doing it.

The land is solely in my name but a partnership is a consideration. Could I do it retrospectively for 2013 accounts?

A limited company is also an option.

Thanks

Farmer Pudsey

OP are you writing off 2/3 of your car costs(fuel, maintenance, tax, insurance and depreciation) as well as Electricity and telephone. Also are you keeping all farm reciepts for small tools etc.

As well if you have two cars you may be able to write both off against the farm accounts, if not consider changing one fr a small van.