How to Choose the Right Accounting Firm?

05-03-2021 8:27pm #1

Hi there,

My situation is as follows:

- self-employed
- no employees
- pretty much passive income with no major overheads
- work from home

I spoke with an accountant today from a seemingly good firm in Dublin.

We suggested to lower my tax burden that I set up a company; or at least to make things financially simpler; as my income is north of 125,000 euros and paying 49% in tax at the end of each year seems a stretch.

However, he said that this involves paying 3,000 - 3,500 in fees each year, assuming that I go with their firm.

I have a feeling he is taking advantage of my income level, and my relative lack of knowledge of the accounting/tax system regarding my situation.

Are these normal fees for someone who doesn't have a complex tax structure?

I sometimes feel they may try to rip off customers based on income. And as someone new to this area, I'm not sure how to approach these companies and establish that I am getting good value for money.

Based on the above, can you provide any assistance / advice / commentary.

Thanks in advance!

tanit · 06-03-2021 12:23pm

The problem with fees is that clients do not realise the amount of work that goes into preparing accounts for them and believe that the accountant is setting the figures on the basis of turnover.

The fess are going to be assessed considering things such as:

How much work they need to do for you: just income tax or income tax, Vat returns, CT, Professional Withholding tax, RCT, etc
Do you do the bookkeeping internally or is it passed on to the accountant to do? In this case the accountant is performing additional work
If you do your bookkeeping, is that bookkeeping well done or would it need significant adjustments before accounting work can start? I cannot emphasise this more because the whole "we have a wonderful bookkeeping system" that takes at least a week to clean up before proper accounting work takes place is not a good reason to lower fees (if you have 6 figure gaps in your accounts, that is NOT good bookkeeping)
Do you have specific regulatory requirements (solicitor, insurance broker, charity, etc)?
Do you use software that produces reports in a way that can help the accountant? At least Excel reports that the accountant can easily export and start working on fast and automatize things a little bit
Do you have specific tax situations that would require a specific/specialist tax knowledge? (for instance do you have business trade with UK/NI for either good or services?, would the accountant need to deal with this from the tax and maybe some Customs point of view?)
Do you have any ongoing or the potential of having any issues with Revenue? (This may not apply to you but some people start talking with accountants when Revenue is already knocking on their door or they think it is going to start knocking at their door and hope that a flat fee will cover them for everything), etc

If you have any concerns about what the fees cover, you should ask for a breakdown of the fees and see what kind of items are being covered by them. You may believe that your tax situation is not complex but that might not be true (you might have a more complicated situation than you think). You might also be someone with very straight forward tax and accounting needs and, in that case, the fee might be a bit high. The best you can do is trying to get a breakdown and more explanations about the fees and what they are covering to help you to understand a bit more why they are offering their services on that price.

Esse85 · 06-03-2021 12:29pm

Have you spoken to other accountants or just the one?

It would be best to chat with about 3 firms and enquire about costs with each.

You'll be in a better position to decide which one to chose then.

ari101 · 06-03-2021 12:31pm

Also, as it's a company, you can't just take cash and worry about it later, Dir loans will need to be limited to 10% Net Assets. So you'll need someone to run a payroll for the company with you as sole employee and/or help you take dividends correctly and do dwt filings.

McCrack · 06-03-2021 12:32pm

Professional services command professional fees

hold my beer · 06-03-2021 12:37pm

I'm an accountant, have my own firm (sole practitioner). If you want to PM me some details I can give you a rough quote. The advice to incorporate to pay less tax is usually a fallacy, as you'll still have to pay high rate tax when you take the funds out via salary. If you don't take it out via salary, you'll pay corporation tax (CT). Then, when you eventually take the profits out, you'll also pay high rate tax on top of the CT already paid.

PM me if you want to discuss it

06-03-2021 1:08pm

Some of the services provided don't make sense to me.

For instance, it mentions the fact I'll be an "employee" furnished with "payslips" on a monthly basis.

Why would this be the case if I'll simply be the owner of the company?

The list of services provided in the fee includes:

completing accounts by year-end
completing Corporation Tax Return, Form CT1
abridged financial statement each year; together with Annual Return, Form B1
liaising with Revenue Commissioners, where required
book-keeping: invoices, sales, bank transactions on their accounts system
reconciliation on a quarterly basis of bank, cash, debtors, creditors and other nominal accounts
wage computation each month; payslip provided
P30s on a monthly basis; annual P35 return

And that's 3,500 euros without VAT, too.

I earn passive income from various online projects. I don't issue invoices or anything like that.

4,305 euros = 358.75 per month.

Is the above deal fair, from the experience of users here?

antoinolachtnai · 06-03-2021 1:55pm

It’s an ok price to do all that stuff. It’s a good price if you get a good quality service that meets your needs. You could learn it all and do it yourself if you wanted.

But it sounds like you have better things to do with your time.

You could get someone to do the bookkeeping for less I expect. But you would need to know what you wanted.

Should you incorporate? I don’t know. Depends on your bigger strategy and plan really.

You still need to do tax returns and VAT whether you have a company or not.

Are you doing any tax planning or pension planning? That sort of thing is important in your situation.

06-03-2021 2:08pm

antoinolachtnai wrote: »

Are you doing any tax planning or pension planning? That sort of thing is important in your situation.

None whatsoever.

Haven't a clue about either to be honest.

Pawwed Rig · 06-03-2021 2:19pm

Fees seem reasonable to me. Our firm wouldn't do it for that price.
Whether is is worth incorporating or not depends on what you said to the accountant. If it is a case that you need all the money for your day to day expenses then incorporating is silly however if you told the accountant that your plan is to build up the business and use the money to expand it then incorporating would seem reasonable. You would need to look at your close company liabilities aswell.

You would need payroll if you incorporate and the company is a separate legal entity to you. You would be an employee of the company albeit a proprietary director.

Accountants are expensive as typically they will have charge out rates of 3 figures per hour. If partner is required then it might be 300 or more per hour. Big 4 would be upto 4 figures. Might seem alot but bear in mind to get to the position I am in took 8 years of studying (4 years of college and training contracts).

tanit · 06-03-2021 2:40pm

The split of services looks reasonable for the fee they are charging, soo long as you don't tell me that you only have a couple of transactions per month.

And like others say if you are going for the company structure you are going to need payroll services as you would become an employee of the company. The issue with the passive income is that you do need to keep track of how that income is being generated and from where, otherwise Revenue will might potentially think you could potentially be money laundering if you don't keep those records. So if there are a significant number of transactions it looks reasonable. You need to make sure that you are getting the reports they are detailing in the fees above and that you make sure you review that information and you are happy with it.

The company structure might help you to lower the tax bill if you use if adequately like for instance to make contributions to a pension, with your turnover it might be worth to consider it.

Accountants, like other professions need a lot of specialist knowledge and their services cost higher precisely because of the amount of time and money required to achieve that knowledge and the expense of keeping up to date that specialist knowledge after qualifying. You can alternatively try learning to do some of the things they are offering, such as the bookkeeping, and do it yourself (again if the accountant gets very poor bookkeeping records and needs to redo it again, they will need to charge for those services). But it is up to you how much time you want to dedicate to do learning and doing those tasks.

06-03-2021 3:22pm

Pawwed Rig wrote: »

Fees seem reasonable to me. Our firm wouldn't do it for that price.
Whether is is worth incorporating or not depends on what you said to the accountant. If it is a case that you need all the money for your day to day expenses then incorporating is silly however if you told the accountant that your plan is to build up the business and use the money to expand it then incorporating would seem reasonable. You won't need to look at your close company liabilities aswell.

Tou would need payroll if you incorporate and the company is a separate legal entity to you. You would be an employee of the company albeit a proprietary director.

Accountants are expensive as typically they will have charge out rates of 3 figures per hour. If partner is required then it might be 300 or more per hour. Big 4 would be upto 4 figures. Might seem alot but bear in mind to get to the position I am in took 8 years of studying (4 years of college and training contracts).

I see, thanks for that information/clarification.

tanit wrote: »

The split of services looks reasonable for the fee they are charging, soo long as you don't tell me that you only have a couple of transactions per month.

And like others say if you are going for the company structure you are going to need payroll services as you would become an employee of the company. The issue with the passive income is that you do need to keep track of how that income is being generated and from where, otherwise Revenue will might potentially think you could potentially be money laundering if you don't keep those records. So if there are a significant number of transactions it looks reasonable. You need to make sure that you are getting the reports they are detailing in the fees above and that you make sure you review that information and you are happy with it.

The company structure might help you to lower the tax bill if you use if adequately like for instance to make contributions to a pension, with your turnover it might be worth to consider it.

To me, it doesn't make sense to pay 49pc at the end of the year.

It's an enormous sum, and too much to send off to the Government. I think having a company structure appears to give me greater flexibility.

In terms of "transactions", most of my income derives from membership sales to my online programs. I'm guessing these individual membership sales is what qualifies as a "transaction" and that each must be accounted for? The total number of transactions across my entire programs probably ranges in the hundreds.

Does each transaction really need to be accounted for? Including if a refund occurs? Why not keep things simple - and simply tax for the total income that derives from all my sources in one go?

Thanks again for the information; trying to learn a lot about this stuff. I can see why it may take 4-8 years now.

Pawwed Rig · 06-03-2021 3:36pm

[Deleted User] wrote: »

Does each transaction really need to be accounted for? Including if a refund occurs? Why not keep things simple - and simply tax for the total income that derives from all my sources in one go?

There may be different VAT rates depending on the transaction. Also each transaction should generate an invoice so unclear as to why it would be an issue to account for each individually. Once you incorporate there may be different tax rates aswell depending if your income is deemed passive or trading.
Tax alone you will have a CT and IT run every year. 12xpayroll runs, 6 x VAT runs, 1 x RTD and potentially DWT. That is 21 different returns that need calculating and work.

That doesn't include CRO filing of annual returns and Fin Stats aswell. You also need to be registered for IT, CT and VAT which requires further paperwork and often generates Revenue queries. The company has to be incorporated aswell.

The guys doing the work for you get paid, rent on building gets paid, business owners take their cut, liability insurance etc etc. The vast majority of the work done for you is bespoke and the work is labour intensive.

06-03-2021 3:40pm

This appears to be the sole trader position:

First, that I can give 49pc of my income to the government. That means 49% of 125,000 = 61,250 euros.

That leaves me with 63,750 euros. Once you subtract one year's rent (26,400 euros), that brings it down to 37,350 euros.

Once you subtract accounting fees at 3,500 euros; it means I keep 33,850 euros; or 2,820 euros per month.

Of course, I have excluded other bills that must be met each month.

Not a lot left from where I started, unfortunately! You work hard to make a six-figure sum, and then find out you're not really much better off compared to someone who has an above-average employment position.

Hence why I'm thinking of the company route.

Pawwed Rig · 06-03-2021 3:44pm

That is not an accurate income tax calculation(not sure where you are getting 49% from) also if you do not incorporate you will not have some of the accounting fees. The ones you do have will be deductible at the marginal rate so will cost you half of the fee that is quoted.

06-03-2021 3:49pm

Pawwed Rig wrote: »

That is not an accurate income tax calculation(not sure where you are getting 49% from) also if you do not incorporate you will not have some of the accounting fees. The ones you do have will be deductible at the marginal rate so will cost you half of the fee that is quoted.

When I originally contacted this firm, I mentioned 52pc and during the consultation, he mentioned it was closer to 48-49pc of whatever I earn at my current income level.

Good to know about the deductible element, I wasn't aware.

Jim2007 · 06-03-2021 9:30pm

Deleted User wrote: »

He suggested to lower my tax burden that I set up a company; or at least to make things financially simpler; as my income is north of 125,000 euros and paying 49% in tax at the end of each year seems a stretch.

Well if your motivation is to lower you tax bill, how much will you actually save by doing this???

In the normal course of events, any money left in the company would attract corporation taxes and presumable any attempt to take it out later will also attract taxes on top of the ones already paid at the corporate level.

Incorporation comes with an array of responsibilities so if it were me, I'd want to see at least the back of cigarette packet calculation so I could get some kind of handle on the benefits versus the costs and additional efforts required to do it.

If say your going to save 12k and pay 3k fees then ya, if your going to save 4k and pay 3k in fees, then I'd pass.

06-03-2021 10:03pm

Jim2007 wrote: »

Well if your motivation is to lower you tax bill, how much will you actually save by doing this???

In the normal course of events, any money left in the company would attract corporation taxes and presumable any attempt to take it out later will also attract taxes on top of the ones already paid at the corporate level.

Incorporation comes with an array of responsibilities so if it were me, I'd want to see at least the back of cigarette packet calculation so I could get some kind of handle on the benefits versus the costs and additional efforts required to do it.

If say your going to save 12k and pay 3k fees then ya, if your going to save 4k and pay 3k in fees, then I'd pass.

What is the usual strategy for someone earning 125k +?

Surely giving 49pc to the government just seems awful. Obviously, a high tax must be paid, but surely there is a way to take advantage of existing tax laws to some degree?

I don't know!

For the company idea; I'm thinking...

If I don't take out too much, it means I won't attract the higher standard rate - at least compared to if I were a sole trader. I'll be honest and admit I haven't done this calculation, nor has the accountant who I have spoken with. It just seems right...

hold my beer · 06-03-2021 10:11pm

Ask your accountant to do some quick projections of sole trader v company

Buddy Bubs · 06-03-2021 10:15pm

[Deleted User] wrote: »

This appears to be the sole trader position:

First, that I can give 49pc of my income to the government. That means 49% of 125,000 = 61,250 euros.

That leaves me with 63,750 euros. Once you subtract one year's rent (26,400 euros), that brings it down to 37,350 euros.

Once you subtract accounting fees at 3,500 euros; it means I keep 33,850 euros; or 2,820 euros per month.

Of course, I have excluded other bills that must be met each month.

Not a lot left from where I started, unfortunately! You work hard to make a six-figure sum, and then find out you're not really much better off compared to someone who has an above-average employment position.

Hence why I'm thinking of the company route.

Your tax calculations are very much wrong.
And you haven't included a single deductible cost. Not having a go at you but I think its the reason you need an accountant. As well as maybe a financial planner, you can pension a decent whack of that income and pay no tax on it. As well as an income protection policy which is important if its just you self employed.

Do you have trust issues with accountants? You've a 125k turnover and a good one will ensure you take home as much of that as possible. I trained as an accountant but never really worked as one, I have worked closely with them though but even still I've saved people thousands through basic knowledge of tax laws. My company retain an accounting firm to do things now, fees are in the region of 40k a year on a 6 million euro turnover. Worth the money.

06-03-2021 10:19pm

Buddy Bubs wrote: »

Do you have trust issues with accountants? You've a 125k turnover and a good one will ensure you take home as much of that as possible. I trained as an accountant but never really worked as one, but I've saved people thousands through basic knowledge of tax laws. My company retain an accounting firm to do things now, fees are in the region of 40k a year on a 6 million euro turnover. Worth the money.

It's more a case of trying to work things out.

Trying to find the best solution for myself, whilst also ensuring I receive "value for money".

I'm unfamiliar with this area, so trying to work things out takes time. I don't want to jump in any choose any accountant for any reason; I need to work it out.

If forming a company will save me not much at all, I'd rather find that out now rather than rushing through a company formation with limited knowledge.

Tow · 06-03-2021 10:22pm

Deleted User wrote: »

The list of services provided in the fee includes:
P30s on a monthly basis; annual P35 return

Lots of posts after the services were listed. Did no one notice the accountant is quoting/charging for two services which have not existed for over two years!

06-03-2021 10:25pm

Tow wrote: »

Lots of posts after the services were listed. Did no one notice the accountant is quoting/charging for two services which have not existed for over two years!

Can you explain further? I'm fascinated to learn more.

hold my beer · 06-03-2021 10:34pm

P30s and P35s have been replaced by real time filing. It too takes time so I wouldn't read too much into the wrong wording used. It's probably a junior copying an old bill or quote

Tow · 06-03-2021 10:41pm

Deleted User wrote: »

Can you explain further? I'm fascinated to learn more.

Revenue have 'modernised' payroll processing. Everything (P30/P35/P45 etc) has been replaced by payroll software talking directly to ROS via APIs.

e.g. before 2019, filing P30s required logging into ROS and manually entering Tax, PRSI, USC and LPT figures (or uploading a file) each month/quarter and selecting how to pay over the money etc.

Now it is a press of the button on the payroll. ROS can be setup to auto direct debit the money from your account. Once setup there is no need to touch ROS again.

I would be wary of an accountant listing processes which no longer exist as a service.

Pawwed Rig · 06-03-2021 10:52pm

Irrelevant. Yes they are now called something else but the filing requirement is the same. We still call them P30s aswell. Also the payroll function will be a minor fraction of the overall fee (probably less than 5% of the €3,500).

06-03-2021 10:58pm

Pawwed Rig wrote: »

Irrelevant. Yes they are now called something else but the filing requirement is the same. We still call them P30s aswell. Also the payroll function will be a minor fraction of the overall fee (probably less than 5% of the €3,500).

Perhaps this is a silly question, but it's purely a curiosity.

For someone whose tax structure is as simple as mine (and I have hitherto included all major factors, I believe), how long on average does it take for a qualified and experienced accountant to work through the set of company accounts form?

I see quotes for 750 euros and more, but - in real terms - how long does an accountant take to work through this, on average?

Pawwed Rig · 07-03-2021 12:12am

Impossible to tell as I do not really know what you are at. But as I said before we would not do all the work listed for the price that was quoted. I would have quoted at least a thousand more at a minimum and we are not one of the top firms.

Just wondering do you ask for this level of detail for every job you get a quote for? ie painters/builders/solicitors etc.? Reason I ask is that we sometimes we get clients who it is clear from day 1 do not value the work we do for them and see it as an inconvenience more than anything else. Not saying you do not have a right to know but how do you deal with quotes from other providers?
I would recomend you contact another accountant and get another quote and compare the 2.

If I was doing it personally (in my own business outside of my day job) I can quote a lower fee as I am not VAT registered and don't have rent etc but equally you are not getting the knowledge and experience of a 15 man team along with the protection of liability insurance. So Yes you might get a cheaper quote but the question is will you get a better quote?

mrslancaster · 07-03-2021 12:22am

Deleted User wrote: »

It's more a case of trying to work things out.

Trying to find the best solution for myself, whilst also ensuring I receive "value for money".

I'm unfamiliar with this area, so trying to work things out takes time. I don't want to jump in any choose any accountant for any reason; I need to work it out.

If forming a company will save me not much at all, I'd rather find that out now rather than rushing through a company formation with limited knowledge.

My tuppence worth:
OP decide first if you want to operate as a sole trader, partnership or company. It depends on the type of business you are starting/offering and how you view risk. Also, some companies like dealing with other companies rather than sole traders so a lot depends on what you do.
One of the main differences is that a limited company is a seperate legal entity and creditors can only claim against assets of the company whereas a sole trader is liable personally for the debts of the business and personal assets like your house/car could potentially be used to pay your creditors.

A sole trader structure is easier to set up and shut down and there's no need to prepare financial statements. Your entire profits are taxed as your income and you need to make a yearly tax return by 31st Oct. You pay tax, usc and prsi on your entire profits (income after expenses) and any money taken out during the year is referred to as drawings. You also need to pay preliminary tax every year.

A limited company has more filing & deadlines plus penalties for non-compliance. Its more expensive to set-up. A director of a company has a lot of legal responsibilities under the companies acts and other legislation. As a director you can be paid a salary (company registers as employer & pays you a salary with all employee taxes), or pay dividends if there are profits, or not take a salary at all. Any salary + employer payroll taxes would be an expense to the company. Directors receiving dividends file income tax returns to revenue.

Your personal tax situation, eg if single/married/jointly assessed etc would also need to be considered and pension contributions.

Lots of people start out as sole traders and if the business grows then they incorporate.

Edit: When you decide which structure is best for you then you can think about what you need to do regarding an accountant.

As a sole trader there may be less returns but you might still need tax advice. As a limited company theres more paperwork & legal things to comply with.

If you want to keep costs down a bit, you could buy some accounting software, get training on how to use it and record the day-to day stuff yourself. You'd still need to pay an accountant/accountancy firm to help with setting it all up to make sure everything was recorded correctly. Then you'd need to pay them to make the returns, eg vat, payroll, year-end, tax advice, exports etc. If you are limited, then there's regular cro filings also.
Imo, any business needs a good accountant and good solicitor to keep on the right side of revenue and cro and they are not cheap but worth it. Best of luck

relevanc · 07-03-2021 1:39am

Pawwed Rig wrote: »

Just wondering do you ask for this level of detail for every job you get a quote for? ie painters/builders/solicitors etc.? Reason I ask is that we sometimes we get clients who it is clear from day 1 do not value the work we do for them and see it as an inconvenience more than anything else. Not saying you do not have a right to know but how do you deal with quotes from other providers?
I would recomend you contact another accountant and get another quote and compare the 2?

I would agree with the above poster.

You come across as someone who doesn’t trust or value accountants and in my experience are likely to be a difficult client if onboarded.

The fees quoted are fair.
There is a lot of compliance and cost related to running a regulated professional service.
There is a considerable amount of work involved in the above engagement.
Good accountants are a benefit to a business in terms of tax planning, business support and sometimes contacts/networking.
Accountancy firms are in business to make a profit.

Organise to meet with one or two accountancy firms and go with the one you feel has the best understanding of your business/can add value to your business, don’t choose solely on price as that can be a false economy.

davindub · 07-03-2021 10:14am

Op one thing about incorporation is the reliefs available when you want to exit.

So if you can leave cash in the company you may be eventually able to avail of retirement and or Entrepreneural relief to extract the cash.

Look the fees are reasonable in my view for the bookkeeping, payroll and accounts, and you have a professional looking over your tax compliance and planning.

Certainly you can get cheaper, but frequently you get what you pay for.

07-03-2021 11:30am

Of course, I appreciate the work that accountants do, and how challenging it must be to become a competent authority in the area. But as I said, my questions are more about trying to understand the entire process involved - and that means coming to understand typical fees for the kind of work that I require.

A poster above mentioned dividends and salary. What's the difference?

Say for example this year I earn 125k (though I anticipate it will be 30-40k higher by the end of the year), and that works out at 10,400 per month.

Clearly, I still need to take money out each month to account for rent/bills/living etc. Is any extraction of funds taken as dividends or salary in this case? And what are the implications of either.

Thanks again for the advice/information detailed so far, as I'm rapidly picking things up.

Pawwed Rig · 07-03-2021 11:41am

Well I guess my point above is that if you hire a builder do you insist on understanding exactly what he is doing or do you agree a price and leave him at it? It is not something you are going to get a full handle on by a brief discussion here. There are courses you can do if you are really interested in it but this is not what you are good at though. You are good at working at your own business and building that income so focus on that and let the accountant do what he does.

Dividends are passive income and are not deductible for CT. Salary is active and is deductible. It is also personable. It is a no brainer to take salary instead of dividend but you may not have a choice if you have a close company issue.

07-03-2021 11:47am

Pawwed Rig wrote: »

Well I guess my point above is that if you hire a builder do you insist on understanding exactly what he is doing or do you agree a price and leave him at it? It is not something you are going to get a full handle on by a brief discussion here. There are courses you can do if you are really interested in it but this is not what you are good at though. You are good at working at your own business and building that income so focus on that and let the accountant do what he does.

Dividends are passive income and are not deductible for CT. Salary is active and is deductible. It is also personable. It is a no brainer to take salary instead of dividend but you may not have a choice if you have a close company issue.

So if a salary is taken each month, this is taxed at the same time?

If it were 4,000 euros, to take a random sum, would that be taxed immediately before I get it?

In terms of demanding explanations, no - I don't. I guess that's why it's important to get multiple quotes.

Pawwed Rig · 07-03-2021 11:52am

Your salary is done via payroll and is taxed at source as your accountant advised. Dividends suffer 25% DWT which you get a credit for in your Form 11.
Your salary might be restricted but your dividends aren't (to the extent that you have distributable reserves).

07-03-2021 11:59am

Pawwed Rig wrote: »

Your salary is done via payroll and is taxed at source as your accountant advised. Dividends suffer 25% DWT which you get a credit for in your Form 11.
Your salary might be restricted but your dividends aren't (to the extent that you have distributable reserves).

I can't get my head around it though.

If the salary is 1,000, then what tax will be taken from it?

And if it is 4,000, what's the tax taken from it?

I don't really understand what tax rates are applicable? Is it a case of a salary is decided at the beginning for the entire year, that way it's known what taxes apply each month?

tanit · 07-03-2021 12:04pm

Deleted User wrote: »

Of course, I have the work that accountants do, and how challenging it must be to become a competent authority in the area. But as I said, my questions are more about trying to understand the entire process involved - and that means coming to understand typical fees for the kind of work that I require.

A poster above mentioned dividends and salary. What's the difference?

Say for example this year I earn 125k (though I anticipate it will be 30-40k higher by the end of the year), and that works out at 10,400 per month.

Clearly, I still need to take money out each month to account for rent/bills/living etc. Is any extraction of funds taken as dividends or salary in this case? And what are the implications of either.

Thanks again for the advice/information detailed so far, as I'm rapidly picking things up.

Dividends would be considered passive income and get a different tax treatment, different reliefs/tax credits, etc. Salary is earned income. Ideally for your day to day expenses you would extract the money via salary.

The amount of work like other and I said in the thread is going to depend on the amount of bookkeeping and the complexity of the accounts along with considerations about all your income sources and where that income is being generated:

How many transactions are taking place?,
Do they relate to goods or services?
Are you dealing with transactions outside Ireland (for instance do your transactions take place in NI, UK, EU or other countries in the world, etc)?
Do you need customs related information for the transactions that are taking place outside the EU? (please notice that NI has a very, very special relation with the EU now and Great Britain is no longer in the EU)
Do you have specific tax needs (dividends, income passive/earned from other countries?
With the level of income/turnover you say you have how come you did not have an accountant until now, do you have outstanding returns, information that need to be submitted to Revenue? Are you expecting a Revenue contact/visit, etc?
Do you regularly drop records requested by your accountant as requested (without forgetting records, bank accounts, assets that need to be added to the accounts, etc) and do you drop them on time?
And how much of that bookkeeping is being done by yourself and how much the accountant it would need to do, not to speak of how many adjustments would need to be done along with how many times you are going to make the accountant go back to you requesting information and how long if would take you to answer

And this is just the beginning, without knowing your specific situation it is impossible to quantify the amount of hours it would take. You can only be given an estimate based on the information you are providing and if you are not providing full details the accountant will come back telling you that they need to issue an extra invoice for the additional services provided.

Like other people have told you in the thread, talk with other accountants, get more quotes from them. Trying to know the amount of hours it can take without having full details would be impossible for anyone in this thread.

tanit · 07-03-2021 12:07pm

Deleted User wrote: »

I can't get my head around it though.

If the salary is 1,000, then what tax will be taken from it?

And if it is 4,000, what's the tax taken from it?

I don't really understand what tax rates are applicable? Is it a case of a salary is decided at the beginning for the entire year, that way it's known what taxes apply each month?

This might help about the issue of PAYE, "What is PAYE?"

If you want to educate yourself more about the topic in the Revenue website
Jobs and pensions

Pawwed Rig · 07-03-2021 12:07pm

[Deleted User] wrote: »

I can't get my head around it though.

If the salary is 1,000, then what tax will be taken from it?

And if it is 4,000, what's the tax taken from it?

I don't really understand what tax rates are applicable? Is it a case of a salary is decided at the beginning for the entire year, that way it's known what taxes apply each month?

It depends on your personal circumstances which your accountant will go through with you. I don't know what credits/SRCOP etc you have. Also I am still not even sure if you have a trade so could not advise on it.

You are the Director so you decide your salary.

relevanc · 07-03-2021 12:12pm

[Deleted User] wrote: »

So if a salary is taken each month, this is taxed at the same time?

If it were 4,000 euros, to take a random sum, would that be taxed immediately before I get it?

In terms of demanding explanations, no - I don't. I guess that's why it's important to get multiple quotes.

All these questions are best discussed with your accountant. That’s what they’re there for.

Would you go on an Internet forum to receive detailed medical advice or make an appointment to see your doctor?
No body here knows enough about your business to give meaningful advice. Accountants/tax advisors have spent years training towards their profession so as to do it well and make a living from it.

07-03-2021 12:28pm

To answer your questions:

tanit wrote: »

The amount of work like other and I said in the thread is going to depend on the amount of bookkeeping and the complexity of the accounts along with considerations about all your income sources and where that income is being generated:
How many transactions are taking place? 250 per month.

Do they relate to goods or services? Services.

Are you dealing with transactions outside Ireland (for instance do your transactions take place in NI, UK, EU or other countries in the world, etc)? Yes, all over the world.

Do you need customs related information for the transactions that are taking place outside the EU? (please notice that NI has a very, very special relation with the EU now and Great Britain is no longer in the EU). No.

Do you have specific tax needs (dividends, income passive/earned from other countries? No.

With the level of income/turnover you say you have how come you did not have an accountant until now, do you have outstanding returns, information that need to be submitted to Revenue? Are you expecting a Revenue contact/visit, etc? I did self-assessment in the past living in other countries.

Do you regularly drop records requested by your accountant as requested (without forgetting records, bank accounts, assets that need to be added to the accounts, etc) and do you drop them on time? I will do, as requested.

And how much of that bookkeeping is being done by yourself and how much the accountant it would need to do, not to speak of how many adjustments would need to be done along with how many times you are going to make the accountant go back to you requesting information and how long if would take you to answer. I'll be doing none of it, that's for sure![/B]

ari101 · 07-03-2021 12:53pm

Generally people set a salary to maximise their lower rate tax bands at a minimum.
They look at how much cash they need to live life. An accountant properly familiar with your details can advise on the gross salary needed to generate an particular net. If you want a basic idea of net, put the numbers from your tax credit cert and a possible gross figure into an online tax calculator.
If there is an excess income after desired salary and expected other expenses, then people may choose to set up a company pension. Employer pension contributions are a fabulously tax efficient way to reduce corp tax, you just need to realise the money is tied up.
Leaving cash / profit in the business may have long term benefits for reliefs as mentioned before, but also may result in close company surcharge, which is generally where a annual dividend might arise to avoid this non refundable tax.
3.5k sounds good based on what you are doing/getting, but meet with a couple of other accountants to find the someone you feel most comfortable with, whose explanations you understand best and who you feel gives you the most value.

relevanc · 07-03-2021 1:22pm

OP are you VAT registered?
From your description it seems likely that VAT on e-services rules may apply (again we don’t know the nuances of your business).
By passive income I assume the supply of the e-learning service requires no human input?
Are these B2B or B2C supplies?
Have you been charging/filing VAT correctly on your worldwide supplies of services?

Also you stated that you have filed tax returns in other jurisdictions?
All these are further complications in what you perceive to be a simple matter

07-03-2021 1:42pm

relevanc wrote: »

OP are you VAT registered?
From your description it seems likely that VAT on e-services rules may apply (again we don’t know the nuances of your business).
By passive income I assume the supply of the e-learning service requires no human input?
Are these B2B or B2C supplies?
Have you been charging/filing VAT correctly on your worldwide supplies of services?

Also you stated that you have filed tax returns in other jurisdictions?
All these are further complications in what you perceive to be a simple matter

No, not VAT registered.

I'm assuming this is something the accountant will bring up, if it applies.

e-learning services that don't require human input; though I can enhance that by working on social media. So, I'm not quite sure where it falls into.

B2C.

Have you been charging/filing VAT correctly on your worldwide supplies of services?

In previous tax returns, no. I simply filed for self-assessment on my entire income and that's all (in other jurisdictions where I lived).

tanit · 07-03-2021 1:48pm

Okay first of all, I would recommend that any information that you provide in this and any other forum would be generic and that no personal or financial information, in relation to yourself or your business activities, is provided.

With the amount of transactions, and considering you are talking about services all over the world, and that is going to possibly involve things like Vat via the One Stop Shop (once you go over thresholds in each EU country you might be operating) and other transactions with specific tax knowledge you are getting a good quotation.

You would need to make sure that the firm you are using has experience in these types of dealings, or they know specialist firms that can provide assistance for any international tax issues, so that they can outsourced the parts that cannot be done inhouse.

Do you have specific tax needs (dividends, income passive/earned from other countries? No.

You DO have specific tax needs
3,000 it is starting to look very cheap, the firm you need would need tax advisors and tax specialists. I am sorry to tell you but you do not have a simple tax structure and you do need proper tax advice if you are in a growing stage in your business. The moment you start having international transactions that go beyond the odd dividends or rental income from other countries, it becomes complicated and depending on thresholds you might need to go beyond One Stop Shop for VAT (this applies to EU countries, you might have other Vat/Sales tax requirements depending on the countries you trade on along with other tax requirements on those countries, etc.)

I don't know how long you have been trading but you do need a firm with tax specialist and good knowledge on International Taxes to make sure you do not get into trouble. Right now it could be an issue of being able to do everything in-house but you might need more specialist knowledge from the International tax point of view.

Again I recommend you to talk with more firms and ask about their knowledge in your specific transactions. And definitely get an accountant because you need proper advice. You do not need a regular accountant, you need someone with specialist knowledge. You do not go to a GP when you are dealing with the possibility of something bigger, they will refer you to a specialist and this is the same.

07-03-2021 2:14pm

tanit wrote: »

Again I recommend you to talk with more firms and ask about their knowledge in your specific transactions. And definitely get an accountant because you need proper advice. You do not need a regular accountant, you need someone with specialist knowledge. You do not go to a GP when you are dealing with the possibility of something bigger, they will refer you to a specialist and this is the same.

Thanks for raising this matter; it's not something I thought of nor was I aware about.

But I'll discuss this matter with an accountant familiar with my case.

relevanc · 07-03-2021 2:32pm

[Deleted User] wrote: »

Thanks for raising this matter; it's not something I thought of nor was I aware about.

But I'll discuss this matter with an accountant familiar with my case.

The fact that you haven’t considered VAT and have been trading 4 years is honestly worrying.
Again your tax situation is complex

Edited to add: highly likely that any self assessments filed in other jurisdictions have been filed incorrectly.
Especially considering you have likely exceeded the vat threshold

07-03-2021 2:53pm

relevanc wrote: »

The fact that you haven’t considered VAT and have been trading 4 years is honestly worrying.
Again your tax situation is complex

Edited to add: highly likely that any self assessments filed in other jurisdictions have been filed incorrectly.
Especially considering you have likely exceeded the vat threshold

I honestly didn't even think about it.

I thought VAT applied to physical goods, rather than online information products/courses.

How does VAT significantly impact my taxation?

Pawwed Rig · 07-03-2021 4:38pm

Deleted User wrote: »

I honestly didn't even think about it.

I thought VAT applied to physical goods, rather than online information products/courses.

How does VAT significantly impact my taxation?

If an assessment is raised against you it could be significant. You are liable to remit VAT not your customers

07-03-2021 4:50pm

Pawwed Rig wrote: »

If an assessment is raised against you it could be significant. You are liable to remit VAT not your customers

Significant in what extent?

Fines, incarceration?

Pawwed Rig · 07-03-2021 4:59pm

Deleted User wrote: »

Significant in what extent?

Fines, incarceration?

I don't know enough about your case and we are probably (hopefully) jumping the gun here but your case is sounding more and more complicated so again there is not much that we can do for you here without the full facts.

How to Choose the Right Accounting Firm?

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