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Quick question on Preliminary Tax

  • 21-10-2019 10:15AM
    #1
    Lord TSC
    Moderators, Sports Moderators Posts: 42,913 Mod ✭✭✭✭


    Howdy folks,

    I have a very small enterprise, and this year is the first year I have to actually pay tax. The previous two years, I've availed of the scheme for new businesses which let me pay no taxes due to being under thresholds.

    So, this year, my tax bill is coming to roughly €1100.

    Now, prelimanary tax states I have to pay (if I'm reading this right) either...

    90% of this years tax
    100% of last years
    110% of the years before.

    90% of this years is about 1000, which suuuucks, cause as I said, small business. I appreciate it comes off next years bill, so it's really just a bad double whammy cause of this year being the first.

    But here's the thing; technically, 100% of 2017's tax is €0. 110% of 2016's is €0

    I know the answer, but figured if I didn't ask, you'd never know. Will Revenue get snotty if I said "I am electing to pay 100% of last year's tax bill, which is €0". Do they have rules that in this scenario, they expect the 90% of this years?

    Or is it ok to kick the can down the road for 12 months, and pay the €0 given the rules state that actually is an option?


Comments

  • #2
    Lord TSC
    Moderators, Sports Moderators Posts: 42,913 Mod ✭✭✭✭Lord TSC


    Just to add, the reveune site says...

    Preliminary tax is your estimate of the Income Tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) that you expect to pay for a tax year. You must pay this by 31 October of the tax year in question.

    You must make sure that you do not under pay your preliminary tax, or you may be charged interest. The amount of preliminary tax for a year must be equal to, or more than, the lowest amount of the following:

    90% of the tax due for that tax year
    100% of the tax due for the immediately previous tax year
    105% of the tax due for the tax year preceding the immediately previous tax year (often called the ‘pre-preceding year’). This option only applies where you pay by direct debit. It does not apply if the tax due for the pre-preceding year was nil.


    It does specify that the 105% option doesn't apply if the previous year was €0, but doesn't make that distinction for the 100% option....


  • #3
    jimmy456
    Registered Users, Registered Users 2 Posts: 90 ✭✭jimmy456


    this year is 2019 and last year is 2018?


  • #4
    emeldc
    Registered Users, Registered Users 2 Posts: 2,598 ✭✭✭emeldc


    I have a small business that I run by myself. I can honestly say that I have never paid the full amount of prelim tax and no one has ever questioned it but I always pay something. I also pay an extra few quid during the year if i have it. I really don't think the revenue are out to disrupt the cash flow of the small business man. I find if you are paying everything else on time (which I am), then they tend to leave you alone. I'm not saying you should do as I do, it's just my experience of it.
    I hope I'm not tempting fate with this post :)


  • #5
    nompere
    Registered Users, Registered Users 2 Posts: 1,678 ✭✭✭nompere


    Lord TSC wrote: »
    Howdy folks,

    I have a very small enterprise, and this year is the first year I have to actually pay tax. The previous two years, I've availed of the scheme for new businesses which let me pay no taxes due to being under thresholds.

    So, this year, my tax bill is coming to roughly €1100.

    Now, prelimanary tax states I have to pay (if I'm reading this right) either...

    90% of this years tax
    100% of last years
    110% of the years before.

    90% of this years is about 1000, which suuuucks, cause as I said, small business. I appreciate it comes off next years bill, so it's really just a bad double whammy cause of this year being the first.

    But here's the thing; technically, 100% of 2017's tax is €0. 110% of 2016's is €0

    I know the answer, but figured if I didn't ask, you'd never know. Will Revenue get snotty if I said "I am electing to pay 100% of last year's tax bill, which is €0". Do they have rules that in this scenario, they expect the 90% of this years?

    Or is it ok to kick the can down the road for 12 months, and pay the €0 given the rules state that actually is an option?

    You're not really reading it properly.

    You can pay as much or little preliminary tax as you like - but if the figure you pay for preliminary tax 2019 doesn't end up being at least 100% of of the 2018 liability, or 90% of the actual liability, then Revenue will charge you interest on the unpaid balance. Revenue will charge you interest at 8% - and it's not a deductible expense in your accounts. Your local friendly bank will probably charge you less than 8% - and you can deduct the interest in your accounts. So it can be an expensive option to use Revenue as your banker.

    But it's your choice.


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