Tax Return Advice Needed!

RazorEdge

Need some advice here guys, this is the first time I have had to file a tax return.

I am an PAYE employee in the IT sector and had the opportunity to do some non PAYE work in 2004. This work was several months in duration and concluded in December 2004. This was conducted in my (rented) home. There will not be any non-PAYE revenue in 2005.

Now is the time to "Pay and File" which I intend to do under the Revenue-Online service.

I am thinking that I should be able to file this return without the assistance of a tax professional, as the amount involved is relatively small, involving one client and very few deductions or expenses on my side.

What I can deduct and when I can deduct it is confusing to me though.

I was working from home so I can legitimately claim for the various utility bills. These expenses will need to be apportioned to exclude the private use though. What is the acceptable maximum percentage that I can claim here? (I assume as well that this percentage should not be applied to the VAT portion of the bill.)

I purchased a laptop "wholly and exclusively" for the purposes of the work. My understanding is that this is a capital expenditure that I can claim a capital allowance on for 2004. What is the maximum that I can claim for in 2004? Can I claim some in 2005 and claim against my 2005 PAYE income as I will not have any non-PAYE income this year?

Any advice is much appreciated...even the "go to an accountant" kind!

kluivert

RazorEdge wrote:

Need some advice here guys, this is the first time I have had to file a tax return.

I am an PAYE employee in the IT sector and had the opportunity to do some non PAYE work in 2004. This work was several months in duration and concluded in December 2004. This was conducted in my (rented) home. There will not be any non-PAYE revenue in 2005.

Now is the time to "Pay and File" which I intend to do under the Revenue-Online service.

I am thinking that I should be able to file this return without the assistance of a tax professional, as the amount involved is relatively small, involving one client and very few deductions or expenses on my side.

What I can deduct and when I can deduct it is confusing to me though.

I was working from home so I can legitimately claim for the various utility bills. These expenses will need to be apportioned to exclude the private use though. What is the acceptable maximum percentage that I can claim here? (I assume as well that this percentage should not be applied to the VAT portion of the bill.)

I purchased a laptop "wholly and exclusively" for the purposes of the work. My understanding is that this is a capital expenditure that I can claim a capital allowance on for 2004. What is the maximum that I can claim for in 2004? Can I claim some in 2005 and claim against my 2005 PAYE income as I will not have any non-PAYE income this year?

Any advice is much appreciated...even the "go to an accountant" kind!

OK not nice people who dont reply.

You can deduct expenses relating to the purpose of the trade.

Add back at least 20% for personal use on those expenses.

Capital Allowance is 12.5% Straight Line ie €1000 * 12.5% = 1250 a year.
You can only claim capital allowances to offset against a particular trade and not PAYE income otherwise everyone will do that. So 2005 is out of the question.

The Revenue may ask you to fill in a TR1 - Income Tax Registeration for self employed persons - If you do not intend to continue this next year you will have to de-register as well or explain your case to the revenue and see what they have to say.

Fair play to you - you seem very honest - not many people would make a return.

Please dont forget to put in your 2004 paye income details into the ROS form as well from your 2004 P60

Hint: ROS has mandatory fields to fill in highlighted in red - dont fill it in if its doesnt need to be ok. Also you will need to prepare an Income and Expenditure Account to back up the figures on your return.

Good luck and any questions PM me.

ck1

Hi, just a note in relation to Capital Allowances, excess capital allowances for Case I/II can be allocated to other income under Section 381 of the TCA 1997. There is a particular order of which income they can be offset against, generally really the order is as to who it can be offset against, ie. Tax Payer, Spouse, etc. Case V Capital Allowances are different, they are very much restricted.

In relation to the 12.5% annually, this really is only allowed if the trade was over the 12 month period, if it was only over a short period i.e period of assessment, the amount claimed should be proratad. However on the other side, the balance, not cost balance, but market value balance, if the trade is ceasing, could be allocated as a balancing allowance.

There are different rules regarding this particularly if the trade only carried on for one year, i.e. what is the penultimate year. If you can get your hands on a copy of Judge, it covers it very well in Chapter 4.

Potentially, it all could be as a balancing allowance if the trade ceased prior to 31st December and was definitely ceasing for future. Not really up on this one, never got call for it ever so never really had to fully read the legalisation.

Just a point on the Add backs, personally I would be very wary of only adding back 20%, my opinion anyway and also the opinion of a particulary Revenue Auditor whom I had the pleasure of liasing with during an Audit. Really in a case where the work was done at night or at weekend at home in one room for a short term and the person had a full time job also, the addback would be more like 90% -95% or 70% - 80% prorata by the period of assessment. The Revenue argument on this would be it did not really increase you bills as you were living there anyway therefore it was not a cost incurred by the business, or only marginally increased you costs.

I totally agree with Kluivert, fair play, most people would not even bother, you must be very honest.

kluivert

Just for my own info thanks for that.

Some very good pointers.

Balancing allowance - never thought about it - good spot.

ck1

Your welcome, and just a further point for you, check out section 382 which allows you to offset losses against other income.

I hate capital allowances actually, there are so many rules and regulations, the Revenue really need to simplify them.