New Business started in 2008 - what tax do I pay in Oct 09?

District · 13-10-2009 09:35PM #1

Hi all,

First post here so please bear with me and I apologise if this has been written about before but the search function is not available at the moment and I couldn’t find the info I’m looking in the first couple pages of threads.

Okay here goes.

It’s getting close to the 31st October and I’m getting a little freaked about my tax.

I started my business in August 2008 – it is a partnership but I hold the majority stake.

Last year I was told that I didn’t have to make a tax payment in October 2008 as I was only opened and that I could make it in October 2009 for any profit I made in 2008 – fair enough I thought as I left it alone.

Now that we are in October 2009 I’m looking at this tax thing again. My books are up to date but I’m not sure what tax I’m liable for. From what I understand and from my research here is what tax I have to pay on or before 31st Oct 2009.

- any tax due for 2008 (Fair enough)
- 90% of my preliminary tax for 2009 (based on some mad calculation b’cos my accounts for 2009 aren’t finalised!)

I also have to submit my 2008 Tax return i.e. based on my final 2008 accounts figures.

Okay now here is the tricky part – someone told me that since I'm a new business I don’t need to pay any tax this year i.e. Oct 2009 but in 2010 I have to pay all my 2008 tax and all my 2009 tax. Confusing or what?

Help! I’m getting really confused here. I know I can get an extension by using the ROS service until Nov 16th but the sooner I get this sorted the better.

So my question this – given that I started business in August 2008 - what tax do I have to pay this coming 31st Oct 2009?

Any advice would be greatly appreciated!

TaxingTimes · 14-10-2009 11:36AM

You need to pay your 2008 liability by 31 October 2009 (or the later deadline if paying and filing on ROS). You do not get the extended deadline if you file online but pay by cheque!

You also need to pay preliminary tax for 2009, which is the lower of 100% of the 2008 liability or 90% of the 2009 liability. You can estimate the 2009 liabiliyt, but if you pay too little on this estimation the Revenue will charge you interest in due course.

What the other person may be mixing up is that you don't have to file your tax returns for 2008 and 2009 until 31 October 2010 (but you still have to pay the tax by 31 October 2009), so you might as well file your 2008 return now.

Do you not have an advisor preparing the partnership accounts and personal tax returns?

District · 14-10-2009 08:41PM

Thanks a million Taxingtimes for your detailed response.

Ok that clears it up now.

I do my own book keeping using a software package but wasn't sure on the tax question for this year.

One more question if I may - am I basing my tax liability/return for 2008 on my 2008accounting year - i.e. Aug 2008 to Aug 2009 or do I base it on the tax period Aug 2008 until Dec 31st 2008?

Thanks again.

mark renton · 14-10-2009 08:45PM

Aug 2008 to Dec 2008

District · 14-10-2009 08:53PM

Thanks John47832 - I'll be stuck in the books for the next few weeks :-)

TaxingTimes · 15-10-2009 07:08AM

You need to prepare your accounts for the 12 month period firstly. Then adjust for tax adjustments - then apportion e.g. x 5/12.

Smcgie · 15-10-2009 07:17AM

District wrote: »

Thanks a million Taxingtimes for your detailed response.

Ok that clears it up now.

I do my own book keeping using a software package but wasn't sure on the tax question for this year.

One more question if I may - am I basing my tax liability/return for 2008 on my 2008accounting year - i.e. Aug 2008 to Aug 2009 or do I base it on the tax period Aug 2008 until Dec 31st 2008?

Thanks again.

Hi I am in a similar situation. What software package do you use. Also what's your view on it. I'm looking for something cheap and cheerful

TaxingTimes · 15-10-2009 02:46PM

The taxable profit for the full 12 month period ended August 2009 is taxable in 2009.

I reccommend SoryMy Books to all of my clients. (However, I am associated with that business, but do really believe it is the best and simplest around for non-bookkeepers doing their own books)

recruitment · 15-10-2009 04:52PM

Hi Ya

Im in the same boat start business in Aug 2008, I registered with ros and it says my form 11 is not due till oct 2010, so from the above post it seems I need to pay any tax due for 2008 in full before nov 16, I have no preliminary tax due for 2009 as I pay a monthly direct debit but yet I dont have to file a return till 2010 is that correct.

District · 15-10-2009 10:45PM

ok this is great!

I'm going to outline my understanding of my tax liabilities and obligations based on what I've learnt here and elsewhere and I would be grateful if people could tell me if I'm correct or need more info.

Ok here goes:

I owe my 2008 tax liability - this calculation is made up as follows:

- Income I earned from a job at the start of 2008
- Dole payments (went on the dole for a few months in early 2008)
- 5/12's of my taxable profit of my accounting period (Aug 08 - Aug 09) (assuming I have profit ;-))

I also owe my 2009 preliminary tax.

My 2009 Preliminary tax Liability is either
- an estimate made up of the remaining 7/12's of my taxable accounting period (Aug 08 - Aug 09) and an estimate of the remaining 5/12's of 2009 i.e. Aug 09 - Dec 09 taxable profit.

OR

- Taken from the Revenue website 'The amount of Preliminary Tax you must pay to avoid a charge to interest is the lower of:90% of your final liability to tax for the current tax year, or 100% of your liability to tax for the immediately previous year.' - so basically I can pay the same tax as 2008 again for 2009 prelim tax?

Once I have calculated my total tax liability I have two remaining tasks

1. Understand the ROS system so that I can pay this online and submit my 2008 tax returns online.
2. then actually submit my returns and pay my tax liability online before 16th Nov.

Am I missing any step in the process (bearing in mind what I have outlined is at a high level)

Hi Smcgie - in response to your question

Hi I am in a similar situation. What software package do you use. Also what's your view on it. I'm looking for something cheap and cheerful

I use sort my books. I find it easy enough to use. It was hard at first (as I'm sure any accounting package would be) but the user guide is quite good and helps explain everything. The one issue I would have with the package is that the format of the Profit and Loss and the Balance sheet are not in what I would regard as the typical format. I remember from school a certain format of how I expected to see the layout of the P & L and the balance sheet but the one that is in Sort my books is different - (only a small thing I know). That said the information is all there and the other reports are very useful.

To be honest I'm just getting the hang of it - your best bet is to download a demo version of all the different accounting packages - TAS/SAGE/Sort my books and give each a test run. Then draw up a cost/benefit list to compare them. I found that just because a package was cheap didn't mean it met all my needs. As well it depends on the type of business you run i.e. cash based versus invoice based.

Let me know how you get on.

Hi Recruitment

From my limited knowledge I think you are correct but to be honest I reckon Taxingtimes is much better placed to answer this.

Again thanks to all for your help and advice.

District · 18-10-2009 01:24PM

Hi All

Just to let you know that there is a comprehensive Tax guide to Pay and File in today's Sunday Business Post. Well worth getting as it has some useful info.

New Business started in 2008 - what tax do I pay in Oct 09?

Comments