MONEY Starting your own business

STAYING POSITIVE Despite the recession, many people are opening new businesses.

Thinking of starting your own business?


Money matters
Brid Conroy

I tend to switch off from talk of our national debt cascading into billions. It seems improbable that we as a country can function, yet we have and I believe will continue to.
Difficult times seem to be bringing out the entrepreneurial in all of us. I am so encouraged by the amount of people setting themselves up in business.
These entrepreneurs are often concerned about their obligations in relation to accounts and taxation.

As a self-employed person, you are now responsible for the following:

• Keeping proper records of all transactions.
• Compiling a set of accounts that shows the profit your business has made in the year.
• Registering for VAT if your sales are likely to be greater than €37,500 in the year for services or €75,000 for goods.
• Paying PAYE for any staff earning more than €8 a week.
• Paying Income Tax, PRSI and Universal Social Charges on the profits of your business

Unless, you are a company, you have no obligation to produce accounts other than to insure your tax is calculated correctly.
You may need them for the bank or if you are applying for a grant. 

Step 1
Firstly, you will need to tell the Revenue you are self-employed. Fill in a form TR1 on www.revenue.ie. Then you must decide what timeframe to do your accounts for.
The simplest way is to follow the calendar year. If you start mid-way through the year, your first accounts will be from say, July 1 to December 31, 2011, while the second year will be from January 1 to December 31, 2012.

Step 2
Then the question is whether to you use an Accounting Program or a manual system. Manual can be used where the business is fairly straightforward. You need to keep a list of your sales with dates, names, details, amounts and dates you received payments. The same list will be needed for purchases as well as a list of all your cheques and direct debits paid. Double-check all monies in and out to your bank statements. A profit and loss statement is the final requirement, showing sales less purchases (see example).

You can buy accounting books or you can keep them on a spreadsheet, such as Microsoft Excel or Microsoft Works. For more complicated businesses, a full accounting system may well be needed. TAS Books Basic is free from www.sage.ie, and comes with 30 days support.

Step 3
Income Tax is due to be paid on October 31 every year. In 2011 you will pay taxes on profits earned in the year January 1 to December 31, 2010, and preliminary tax for the predicted profit of your business from January 1, 2011, to December 31, 2011.
Note that only expenses ‘wholly and exclusively’ used for business can be included as an expense for taxation. If you work from home, you may include a reasonable percentage of your household expenses. Keep a record of your business miles to calculate the percentage for motor expenses but not journeys to and from a normal place of work. Food is allowed if have to travel as part of work. Interest paid on borrowing is allowed as are lease payments on business equipment. Other capital items are allowed at 12.5 per cent per year.
You need to fill out Form 11 to tell the Revenue all your details from above. If you get it to them by August 31, they will calculate the tax for you.

Finally, remember keep all records for six years.

While all of this may sound complicated, be assured, it is really quite straightforward once you get the hang of it. Moreover, getting in the habit of good record keeping and reporting will save you a lot of time and stress in the long run.

While every effort is made to ensure that the information given is accurate, it is not a legal document. Responsibility cannot be accepted for any liability incurred or loss suffered as a consequence of relying on any matter published herein.

BRID CONROY FCCA is a Chartered Certified Accountant with a practice in Louisburgh. She works on improving personal finances and the profitability of small and medium-sized businesses. To contact Brid, call 098 66870 or theoldschool@iolfree.ie.