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Obligations of a Sole Trader

Your obligations are met with Accounting Anytime.

In Business you have certain tax & obligations which must be adhered to with our Accounting Anytime packages we ensure your obligations are met have a read and see for yourself….

Proper books and records for tax purposes.

  • You must keep full and accurate records of your business from the start. You need to do this whether you send in a simple summary of your profit/loss, prepare the accounts yourself, or, have an accountant do it. It is important for you to remember that the figures which are contained in your accounts, or your summary of profits/losses, or your tax returns, must be correct. The records you keep must be sufficient to enable you to make a proper return of income for tax purposes.
  • You should bear in mind that you may need to keep accounts for reasons unconnected with tax, For example, your bank may want to see your accounts when considering an application for a business loan.
  • You must keep your records for a period of six years unless your Inspector of Taxes advises you otherwise.

Income Tax Return

Self employed persons ( People carrying on their own business) must return an Income Tax return. An Income tax return is covered under the self assessment system. Under Self-Assessment there is a common date for the payment of tax and filing of Tax Returns, i.e. 31 October. This system, which is known as 'Pay and File’, allows you to file your return and pay the balance of tax outstanding for the previous year at the same time. Under this system you must:

  • Pay Preliminary Tax for the current tax year on or before 31 October each year,
  • Make your Tax Return after the end of the tax year but not later than the following 31 October.
  • Pay any balance of tax due for the previous tax year on or before 31 October.
  • Pay any Capital Gains Tax on disposals made between 1 January and 30 September of the current tax year

Employer's PAYE /PRSI/Income levy

Where you as a self employed person employ employees in your business you  must operate a payroll system and operate the PAYE system. The Pay As You Earn (PAYE) system is a method of tax deduction under which an employer calculates and deducts any income tax due each time a payment of wages, salary etc. is made to an employee.

In addition, employers are obliged to calculate and deduct any liability to Pay Related Social Insurance (PRSI) and income levies.

  • A company must register as an employer and operate PAYE/PRSI on the pay of directors even if there are no other employees.
  • Each registered employer is issued each month (or each quarter in the case of quarterly filers) with a form P30 Bank Giro/Payslip on which their name, address, registration number and the relevant month are computer printed. The figures for total tax and total PRSI contributions should be entered on the form together with the gross total which will equal the amount of the remittance.
  • Each registered employer in Ireland is obliged by law to account each year for the PAYE/PRSI deducted from his or her employees. A special return, which is commonly known as a P35 return, is used for this purpose. Please note that the final date for returning your completed P35 for year ended 31st December is the 15th February of the following year.

Employers should keep a record of the employee's and the employer's PRSI:

  • The Employee's weekly/monthly PRSI contributions
  • The Total weekly/monthly PRSI contributions
  • The contribution class of the employee
  • Any change of contribution class during the employment
  • The new contribution class where the class has changed
  • The date of change of contribution class, if any
  • The number of weeks of insurable employment at the initial class (and at the subsequent class(es) if the contribution class has changed

Employers and the Income Levy

As an employer, your responsibilities in relation to the collection and remittance of the income levy are:

  • Deduct the levy from income at the appropriate rates.
  • Pay the total amount of the income levy deducted from your employees on form P30 to the Collector General – the income levy amount is to be included with figure for PAYE on form P30.
  • At end of year give details of the income levy on form P35L

Accounting for VAT

Vat is a value added tax that must be accounted for if your business is or likely to exceed the vat Turnover thresholds. The current thresholds are as follows:

Supply of Service €37500

Supply of Goods €75000

If your business exceed the above thresholds you must register for Vat.

The document used by traders to account for VAT is called a VAT Return (Form VAT 3). This must be filled out by a trader at the end of each taxable period. A taxable period is normally two months long, and is counted from the start of the year – January/February is the first one each year. The VAT return will contain figures reflecting the transactions carried on by the trader, including the amount of VAT charged by him or her, and the amount of VAT that he or she wishes to reclaim. Any imbalance between these two figures will indicate either a payment of tax due from the trader to Revenue, or a repayment due from Revenue to the trader. In certain circumstances, a trader may be permitted to make returns at different frequencies

Retention of Tax Records in Electronic Format

Section 887 TCA 1997 has simplified procedures. The section allows businesses to keep records electronically, without specific Revenue approval, provided that they are kept in accordance with guidelines published by the Revenue Commissioners. The guidelines which were published in Iris Oifigiul number 83 dated 16 October 2001. Section 887 TCA 1997 applies, including a case where the records are held by a third party service provider.