Can you explain this please. (this is not intended sarcastically)
Can you explain this please. (this is not intended sarcastically)Pro forma invoicing has been illegal here for 20 years.
@ Paul o Mahoney, I will keep my response amicable. This is not a wind-up and nowhere did I mention anything about profit.I cannot believe that that you think you pay tax on revenue as opposed to profit.
A fundamental business tenet, this has to be a wind up , if not I worry about our entrepreneurial future.
Are you registered for VAT? The additional paperwork for claiming back VAT on unpaid invoices is far more complex than calculating your taxable profit.Each year, 10-20% of invoices go unpaid/never paid. This is a fixed figure and can not be improved upon. This has been accepted.
Revenue from memory do not allow you to claim vat from pro forma invoicing and they essentially stopped companies from doing it, I'm going back 20 years . We had a vat audit and we were told that the practice was illegal.Can you explain this please. (this is not intended sarcastically)
I apologise if I sounded crass, but if you are doing the figures you stated or even half that a basic understanding of accounts ,vat, invoicing would be needed.@ Paul o Mahoney, I will keep my response amicable. This is not a wind-up and nowhere did I mention anything about profit.
And thank you who have replied to provide advice.
Just to re-cap:
This is additional income, I am a PAYE worker. Therefore I will be paying tax at 40% on profit from all non-PAYE income . The figures involved are 5 figures- €x0,000. It is a non-cash business and with fully traceable transactions and payments through a billing company.
Each year, 10-20% of invoices go unpaid/never paid. This is a fixed figure and can not be improved upon. This has been accepted.
My costs are fixed and do not vary significantly.
If I use the billing date of invoices- ie all invoices issued in 2020, My income from which I calculate my trading profit will be falsely high and I will overpay tax significantly (@40%).
If I maintain this then I am in a cycle of overpaying tax and then having to reclaim tax back.
If I use just the money I receive in 2020 (and each year moving forward) as income from which to calculate profit then I will be paying the correct amount of tax consistently.
I hope I have explained my situation adequately
I am also seeking professional advice but also a firm believer in seeking a second opinion.
Thank you again.
That part is correct. A proforma invoice is not a VAT invoice.Revenue from memory do not allow you to claim vat from pro forma invoicing
Proforma invoices are 'illegal'?? First time I've heard that. And I've seen a lot of them.we were told that the practice was illegal.
Obviously I picked it up wrong then as I said this was 20 years ago and the audit was a difficult oneThat part is correct. A proforma invoice is not a VAT invoice.
Proforma invoices are 'illegal'?? First time I've heard that. And I've seen a lot of them.
I'd suggest the OP's business is not untypical of many one-man-band operations where the sole "product" offered is the owner's services, based on skills and experiences. I run a similar operation myself, since retiring from my main PAYE job, with a handful of customers accounting for the vast bulk of my revenue. My accounts, such as they are, are very simple. It's revenue based on invoices issued minus costs. Costs are fairly simple and cover things like professional subscriptions, insurance, trade journals, routine office supplies, phone, broadband, etc etc. Typically, costs are less than 10% of revenue. I have one lever arch folder where I keep invoices and receipts and an Excel spreadsheet to summarize it all.I apologise if I sounded crass, but if you are doing the figures you stated or even half that a basic understanding of accounts ,vat, invoicing would be needed.
I would find it difficult to believe that a business of that size would be run efficiently without a basic accounting package like sage or quickbooks.
The figures are large but there appears to be no back office?
That's what I meant by back office, a file with invoices both sales and expenses if applicable. But there doesn't even be that in the case above, and the poster is also a paye worker .I'd suggest the OP's business is not untypical of many one-man-band operations where the sole "product" offered is the owner's services, based on skills and experiences. I run a similar operation myself, since retiring from my main PAYE job, with a handful of customers accounting for the vast bulk of my revenue. My accounts, such as they are, are very simple. It's revenue based on invoices issued minus costs. Costs are fairly simple and cover things like professional subscriptions, insurance, trade journals, routine office supplies, phone, broadband, etc etc. Typically, costs are less than 10% of revenue. I have one lever arch folder where I keep invoices and receipts and an Excel spreadsheet to summarize it all.
Very simple and basic. The idea of a separate "back office" function is vast overkill!
There is nothing curious, I provide a professional service, a billing company will issue an invoice. The billing company gets paid. They withhold 20% tax and take a fee. They pay me the residual. At the end of the tax year, I pay the outstanding tax balance. I have recently employed an accountant and I am due to meet them soon.That's what I meant by back office, a file with invoices both sales and expenses if applicable. But there doesn't even be that in the case above, and the poster is also a paye worker .
And the additional income figures substantial, it's a curious one.
" implied slights" really? you posted the initial post and now you've added withholding tax , commission and I would wonder what else will be added.There is nothing curious, I provide a professional service, a billing company will issue an invoice. The billing company gets paid. They withhold 20% tax and take a fee. They pay me the residual. At the end of the tax year, I pay the outstanding tax balance. I have recently employed an accountant and I am due to meet them soon.
I would really appreciate it if we could stick to the question without implied slights!
Again, I will distill my question into this:
Is there any precedent for paying tax on trading profit calculated from income received in a single tax year as opposed to invoices issued in that tax year?
No, assuming you mean "cash received" rather than income..." Is there any precedent for paying tax on trading profit calculated from income received in a single tax year as opposed to invoices issued in that tax year?"
This is an important issue too,Unless the invoices are in the name of the billing company rather than your personal name.