Taxable income question

helen87

Hi All, so my dad is a farmer and over 65 and has not paid tax for the last while until this year when the accountant is saying he is due to pay a few thousand. looking at the details on his f11 it states that his net profit is very low but that his assessable income is nearly 20,000 more. could this be wrong as i looked at the previous years ant his net profit was higher than his taxable. what items would cause the difference between the net and assessable profit.
i have tried to contact the accountant but he is unreachable at the moment!
thanks in advance guys.

Stratvs

Net profit in the accounts and adjusted profit for tax purposes can differ. The accounts may reflect items which are not fully tax deductible, e.g. all the light & heat, all the motor, all the phone might be in the accounts but some of that would then be added back to profits in getting the adjusted amount he is then assessed on. They may not make that much difference though as the amount you mentioned. But the other item could be depreciation in the accounts versus Capital Allowances for tax. There will be differences in the write off of equipment/machinery for accounting purposes and for tax. Or possibly some piece of equipment that was previously written off for tax may have been sold ( e.g. change of tractor or something ) and that can create what's called a Balancing Charge. You'd need to see the Tax & Capital Allowances Computations to see where the accounts profit and tax assessable profit differ.

Allinall

If he is collecting the OAP, then this will be added to his net profit ( adjusted per above) to calculate his taxable income.

helen87

Stratvs wrote: »

Net profit in the accounts and adjusted profit for tax purposes can differ. The accounts may reflect items which are not fully tax deductible, e.g. all the light & heat, all the motor, all the phone might be in the accounts but some of that would then be added back to profits in getting the adjusted amount he is then assessed on. They may not make that much difference though as the amount you mentioned. But the other item could be depreciation in the accounts versus Capital Allowances for tax. There will be differences in the write off of equipment/machinery for accounting purposes and for tax. Or possibly some piece of equipment that was previously written off for tax may have been sold ( e.g. change of tractor or something ) and that can create what's called a Balancing Charge. You'd need to see the Tax & Capital Allowances Computations to see where the accounts profit and tax assessable profit differ.

Thanks for the reply, so there is three figures that i am trying to figure out, so there is the net profit whish is the really low amount and then there is adjusted net profit which i have worked out to be addbacks of depreciation and some Motor & light and heat which has added on 7k. but then there is the assessable profit which is a further 13k more. No Machinery was sold that would have been worth that much, is there anything else that would be added on here?

phormium

Did you check the pension bit? It would be a reasonable match for that amount.

Stratvs

helen87 wrote: »

Thanks for the reply, so there is three figures that i am trying to figure out, so there is the net profit whish is the really low amount and then there is adjusted net profit which i have worked out to be addbacks of depreciation and some Motor & light and heat which has added on 7k. but then there is the assessable profit which is a further 13k more. No Machinery was sold that would have been worth that much, is there anything else that would be added on here?

Are you looking solely at Self-employed Income Trade 1 on the F11 where it says
"Profit assessable in 2019" and then "Assessable Profit" ?

Or are you looking at the total income at the IT Self-assessment page which as other poster said would include the pension?

helen87

Stratvs wrote: »

Are you looking solely at Self-employed Income Trade 1 on the F11 where it says
"Profit assessable in 2019" and then "Assessable Profit" ?

Or are you looking at the total income at the IT Self-assessment page which as other poster said would include the pension?

Its on the trade income page before taking any other income like the sw pension

Stratvs

helen87 wrote: »

Its on the trade income page before taking any other income like the sw pension

OK well if Assessable Profit exceeds the Net Profit in the accounts schedule it's usually from the addback of depreciation/gains on disposal & non-allowables such as l/heat etc. as already mentioned.

The only other thing that comes to mind is was there any equipment/machinery on leasing which came to an end in the year? The termination of a lease can cause adjustments in the year of termination.

If you still have a €13K gap after these then you'll need to ask the accountant I think ( The tax computation links these two figures so a copy of that would help clarify it ).