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Income Tax - The Basics

Posted 19/9/2016

What is an Income Tax Return?

Your income tax return is a submission made to Revenue declaring what your self-assessed tax liability is for the previous year. (i.e. your tax return made in 2016 relates to the trade carried out in 2015.) In simple terms it is calculated by deducting allowable expenditure from income, to calculate taxable profit, and multiplying this by the appropriate tax rate.

 

Who needs to file an Income tax return?

  • Self Employed Person
  • PAYE worker with investment or other income (e.g. rental income)
  • Director of a company with >15% shareholding

 

What are my obligations?

  • To register for tax.
  • Filing of correct tax return on time.
  • Payment of tax liability in full and on time.
  • Maintenance of records for 6 years (penalty of €3,000)

 

When does a tax return need to be filed?

  • The pay and file deadline for Income Tax is 31st October each year.
  • By using ROS to both pay and file online this is extended to 12th November.
  • If you have all of the information ready do not delay in filing your return. The closer to the deadline the busier ROS gets and it may be slower or worst case it could crash leaving you with the risk of late filing and payment.

 

What happens if I’m late?

If you miss the deadline and file your Income tax return late, a surcharge will be added on to your tax due, as follows:

  • before 31st December 2016 – penalty of 5% of the tax due (max of €12,695), e.g. if your final tax bill is €1,000, a surcharge of €50 (1,000 x 5%) is added – total to pay €1,050.
  • after 31st December 2016 – penalty of 10% of the tax due (max of €63,485), e.g. if your final tax bill is €1,000, a surcharge of €100 (1,000 x 0.10) is added – total to pay €1,100.

 

What is Preliminary Tax?

Preliminary tax relates to the current year. (i.e. in 2016 it is an estimate of your 2016 tax liability). It covers your liability to PRSI, USC as well as Income Tax.

To calculate your Preliminary Tax, it is the lower of:

  • 90% of your final liability for the tax year, or
  • 100% of your final liability for the previous tax year, or
  • 105% of your final liability for the pre-preceding tax year. (This option is only available where preliminary tax is paid by direct debit and does not apply where the tax payable for the pre-preceding year was nil).

 

What happens if I don't pay my full Preliminary Tax on time?

If you don't pay your Preliminary Tax by 31 October or if you don’t comply with your direct debit arrangement or if the amount of Preliminary Tax you pay is too low, you will be liable to an interest charge. Interest is due from the due date, on late payments of tax, for each day or part of a day at a rate of 0.0219%. eg if your Preliminary Tax liability is €1,000 this equals €22 per day from 31 October. To avoid this risk it is advisable to pay 100% of last year’s liability.

 

How much does an Income Tax Return cost?

This will depend on the quality of bookkeeping undertaken during the year but on a basic level, the cost will be in the region of €480 (ex VAT). Our clients can pay their fees over 12 months via an interest free direct debit arrangement.  Clients that choose this option will receive a “Business Review” performed free of charge. If you would like to hear further on this or any other of our services please contact us.

 

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Changing Accountant - Is it worth the hassle?

Posted 12/9/2016

Changing Accountant is not a complicated process and will neither create additional work for you, nor disrupt your business in any way.

It really is not complicated to change accountants.It really is not complicated to change accountants.

Below are some questions that you can ask yourself which may help you to judge if your accountant is providing you with the service that you and your business deserve:

  • Is your Accountant proactive in providing business advice or is contact limited to when you ask for something?
  • Do you feel like your business is not important to your accountant?
  • Do you feel that you are paying excessive fees to your accountant for the value provided?
  • Does your accountant take days to respond to calls or emails?
  • Is there a different junior member of staff dealing with your affairs every tax year meaning the same issues need to be explained over and over again?
  • Would you like your accountant to provide more business advice in a manner that would add value to your business?
  • Do you know and understand what you are paying your accountant to do?
  • Does your accountant explain the results of his work in easy to understand terms?
  • Does your accountant provide you with instalment arrangements to pay your fees?
  • Do you trust your accountant and would they be the first person you would call for any business or finance related advice?
  • Is your accountant up to speed with the latest technologies to provide you with a cost effective service?

 

It is a very simple process to change accountants. We will write to the outgoing accountant seeking standard professional clearance and, although there is no legal requirement, it is best practice for you to advise your previous accountant by letter (example below) or telephone call that you are changing to us. The outgoing accountant is then obliged to pass on the information we require provided professional clearance is given. It is as simple and as easy as that!

 

Sample Letter 

[Accountants Name]

[Address 1]

[Address 2]

[Address 3]

 

[Date]

Dear [Accountant Name],

Re: [Client Name: Joe Bloggs – Tax Number ########]

 

After careful consideration, I have decided to appoint a different accountant to undertake all my accounting and taxation work.

I have asked Mc Guigan & Co. Chartered Accountants to act as my accountants and professional advisors.

I authorise you, as my former accountant and professional advisor, to provide them with any information that they may require.

I thank you in advance for your prompt assistance in dealing with their request.

I would like to take this opportunity of thanking you for all for the assistance you have provided over the past years and wish you and your firm all the best for the future.

Yours sincerely

 

 _____________________

[Your Name]

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Networking - Whats the point?

Posted 7/9/2016

This is a question that many people have asked themselves, indeed I asked it myself prior to joining my first group a number of years ago. Through my experience I have found that effective networking can be a very powerful tool for you and your business.

There are many forms of networking including;

Informal networking – social events, volunteer groups etc.

Organised Network Groups – Chamber of Commerce Events, Networks Groups such and BNI, Women in Business or the local Kingdom BIZ Killorglin Group.

Online Network Groups – Groups on LinkedIn or Facebook or Twitter groups such as @irishbizparty or @KingdomBizHour

So back to the question: Why bother with any of these? Are they a good use of my time? What are the benefits and what is the best strategy to use?

I have found that the best strategy to adopt is to “Put Others Needs Before Your Own”. Also known as the “How Can I Help You?” strategy.

When networking, it is always important to remember your brand. You Are Your Brand and the aim is to turn all your contacts into advocates of your brand. The best way to do this is by listening to their needs and suggesting solutions where possible. Remember that you have two ears and only one mouth so listen at least twice as much as you talk. If a person is only in it for themselves, and provides little assistance to the group, this will reflect poorly on their brand and as a consequence networking could end up having a negative impact on their business.

The four key benefits that I have experienced are: Advice & Information Sharing, Leads & Referrals, Reputation & Credibility, and Positivity & Self Esteem.

Advice & Information Sharing

The depth of knowledge and experience in a group can often be under appreciated. The members may have experienced similar issues that you or your business are going through. Use the group as a form of market research to bounce ideas off of or to look for better ways of doing things. Learning from others best practices or mistakes saves time, energy and potentially money.

Leads & Referrals

If your network trusts you then they will refer you to contacts in other networks should the opportunity arise. Similarly it is great forum to hear about new businesses in the area before it is common knowledge, which may give you a march on the competition. Possibly more important than Leads and Referrals your network can also warn you if they have had negative experiences with potential clients of yours which could save you a lot of time, heartache and money.

Raising your Profile, Reputation and Credibility

Having a large network will improve your personal and professional profiles; it will also be very useful if you wish to promote a new product or service. Word of mouth is still one of the most powerful forms of advertising, be it online or face to face. Credibility and reputation are greatly enhanced by endorsements or recommendations from seemingly unconnected third parties.

Positivity, Confidence and Self Esteem

Being involved in a network of people with a common interest can improve self-esteem and build confidence. I remember one of the biggest things that I got out of the first network I was involved in; was the feeling of “If they can do it so can I”. Your confidence will grow from speaking about your business to the members of your network which will make it less daunting to speak to other third parties. Providing that you are honest the members of your network will be there to reassure you in difficult times and also to challenge you if you are acting recklessly.

A new Face to Face network “The Kingdom BIZ Killorglin Network” will launch on Thursday 15th September. Meetings will take place weekly on Thursdays from 7:30am to 8:30am. Spaces are limited and we can only admit one member per profession/trade/service. Please contact me for further details.

Monthly Kingdom BIZ networking evenings will take place once a month, these will be less formal and more social gatherings. Further details will be announced on Twitter @KingdomBIZHour or www.kingdombizhour.com closer to the first meet-up.

Face to face networking can sound daunting for some but don’t forget about social networks, these have many advantages as they remove geographical barriers. You will have more time to respond to queries and it is easier to keep record of who you spoke to and about what. There are plenty of online forum and discussion groups across Facebook, LinkedIn and Twitter. One of such is @KingdomBIZHour on Twitter which meets every Thursday online between 9pm and 10pm. You can join the chat and make new connections or just watch the hashtag #KingdomBIZ and if something or someone grabs your attention you can engage with them.

The important thing about networking is to always remember that you are representing your brand. The way you treat others will be assumed to reflect the way your business would treat them. Remember if at first you don’t succeed, congratulations you are normal, try again and again and again. Advocacy is the goal of networking as word of mouth advertising is inexpensive and very effective.  

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What does an Accountant do anyway?

Posted 22/8/2016

Recently I was asked this question which was followed up by “Tax and stuff is it?”Your accountant can help you review, analyse and improve your business performanceYour accountant can help you review, analyse and improve your business performance

The real question should be “What CAN my accountant do for me?”

Yes, sure, an accountant can do “tax and stuff” but I want to focus on is this so called “stuff”.

I was shocked to find out how many sole traders and business owners only interact with their accountant once a year at tax return time or when accounts need to be filed. These are very important roles of the accountant but are you and your business missing out by not demanding more?

Of course additional services are likely to have a financial cost, but most accountants will now agree a fee up front so that you can decide if the cost is worth the potential benefits to you or your business. If you don’t like the cost then don’t proceed or look elsewhere for a better price, but be careful as sometimes you get what you pay for!

“Fail to Plan and Plan to Fail” is a phrase that I often heard when undertaking the Limerick Enterprise Acceleration Program and it rings through for many businesses. While a detailed business plan may not be necessary for every business, some element of at least annual planning is essential. Most accountants have extensive experience in budgeting, forecasting, financial modelling and cashflow management. These can be done on Microsoft Excel or by using some of the online applications such as Xero, SortMyBooks or BigRedCloud.

Many people are reluctant to create plans in case they fail to met expectations, as they could then feel disheartened or use this perceived failure as a stick with which to beat themselves. This should not be the case, in fact if these forecasts are revised at least quarterly it is better as it enables you to take changing circumstances into account. For example you may have gained additional business that wasn’t foreseen or have lost a large client or great sales person.

“Cash is King” is another phrase I often hear and we all know as true. Cashflow planning is of paramount importance to ensure bills can be met and staff can be paid. Many small businesses survive from week to week or month to month and at certain times in the year struggle to make payments. With some cashflow planning and the assistance of your accountant life can be made much easier and decisions made much quicker as the impact on your cashflow will be immediately measureable.

Your accountant should be your trusted advisor and the first person you call for business advice, but if you think they are telling you something because it’s what you’d like to hear, then it is time to move on. Honesty and integrity are the core values of good accountants, even if it means that I may loose a client, I will always give them an honest opinion because if I don’t then I am letting myself, my profession and my client down badly. Depending on your accountants experience they can assist with developing business strategy and performing market research or at least sense check any work that you have performed.

Feasibility can be ascertained through a relatively inexpensive engagement with your accountant, if you plan on investing on expensive new equipment or a new business it is always a good idea to run through the rationale and numbers with an accountant who is not emotionally involved as you may be.  

Regardless of the size of your business it is always a good idea to have good procedures and controls in place, the earlier you do this the better as it can be more difficult to change old habits. Having someone observe the way you operate, and suggest improvements, can generate enormous efficiencies in your business and help deter and prevent theft and fraud.

By having a good accountant assist you when applying for any grants, bank finance, or other funding such as crowd funding or EIIS Investment (formerly BES), it will greatly enhance your potential for success. When I worked with the Pinnacle BES Fund I saw many good business ideas applications ruined by the submission of terrible business plans that clearly had not been prepared by or reviewed by an accountant.

Many business owners are not aware of the funding opportunities in the market place or the government incentives available to them. Your accountant can look into these for you and suggest any that may be appropriate for your business.  

As the tax return deadline is approaching there is no better time than now to discuss the services mentioned above with your trusted accountant.

Alternatively if you would like to discuss these services with us please contact us today for a no obligation free consultation.

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Why did I set-up an Accounting Practice?

Posted 29/7/2016

For as long as I can remember I wanted to have my own business. I enjoy meeting people, am a good listener and am passionate about Irish business. What better way to combine these than set up my own positive “can-do” accounting practice “Mc Guigan & Co”.

I can use the skills that I have learned and developed through my career to date to help clients manage their business more effectively and reach their goals.

When Managing Director of Local Market Direct Ltd I met hundreds of small business owners, my goal at the time was to help them access the online market. I enjoyed my interactions with them and built some strong relationships. Many clients spoke to me about challenges that they were facing and it was clear that they did not have a good relationship with a trusted advisor that they could call on for guidance.

 My training in Ernst & Young and work in large multinationals such as Kerry Group, Trend Micro and Young & Rubicam means I have a good understanding of processes and controls for both financial and operational procedures. Many of these can be easily transferred and applied in small businesses.

The corporate finance experience I gained while in Horwath Bastow Charleton was invaluable to me when I worked as Finance Director in Capital Assets and when I set up Market Direct. I was involved in many company valuations, finance applications and prepared and reviewed hundreds of business plans as part of the Pinnacle BES (now EIS) Fund team. I also prepared property asset management plans both here and when in Capital Assets to help clients maximise the value of their property assets.

Many client/accountant relationships are based on contact once a year at tax deadline time. This is not what Mc Guigan & Co Chartered Accountants are about. As mentioned I am passionate about Irish Business and want to add value to my clients. While on-time and accurate submissions to Revenue are important I also want you to understand your numbers and how to possibly improve performance. This doesn’t mean added work for you, by using the latest accounting technologies we can help your business become more effective. If this approach to accounting interests you please contact us today for a no obligation free consultation.

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