Hobby Farm P&L Account: Acceptable costs ?

S

Schillachie

Registered User
Messages
24
Hi There,

I am submitting a simple Farm account for the 1st time for year 07 although the land was purchased a year or 2 earlier. It will be a Profit and loss account only. I believe this is sufficient.

I had a lot of work to do to improve how it will work which incurred a net cost approx of 12000 euro. This is considered once off.

Since this is essentially "Hobby Farming" and as I am also a PAYE worker, I
have some questions. Note that I do intend to be in profit with stock sales and possibly REPS 4 grants in 2 or 3 years.

Can I apportion interest payments I pay on the loan I used to buy the
land 4 years ago ? If so how long can I do this ?
Can I apportion ESB from my normal house bill as an expense for this
account ? How much is acceptable ? How do I receipt this or are revenue ok with this ?
Can I apportion Phone from my normal house bill as an expense for this
account ? How much is acceptable ? How do I receipt this or are revenue ok with this ?
Can I apportion Diesel from my normal driving bill as an expense for this
account ? I do actually visit the farm at least once a day but is 10k away. How much is acceptable ? How do I receipt this or are revenue ok with this ? I reckon 500 euro is about right and I have receipts.
Can I apportion any amount of unreceipted casual labour to this farm
account ? How much is acceptable ? How do I receipt this or are revenue ok with this ?


I believe that for Farm accounts, a profit has to be shown every 3 years,
how does that leave me. If 2007, 08, 09, show a loss and 2010 shows a
profit, will revenue be ok with this ?

With a net loss of 10K for year one, is there any way this or part of this loss can be offset against any PAYE tax I or my wife pay ? I would be in the 41 % tax bracket.

If so, should I put my wife's name on this farm account also ?

Any help would be much appreciated, Schillachie
 
You really need professional advice on this one, far too many questions! You should be able to offset farm losses against other income for tax purposes, subject to the 3/4 year rule, however if this is pure hobby farming as opposed to a commercial enterprise, there may be a question mark over that.

Casual labour (unreceipted or otherwise) is a minefield unless you have operated PAYE/PRSI. The Revenue will go to town on you if they discover otherwise.

As I say, you really should be getting proper advice on this and the other questions.
 
As a tax-accountant myself, you raise a multitude of q's ... too many for here - you need professional tax (not accountancy) advice. A number of taxes are at play here - even VAT re the work you were required to do to get the farm working, CGT re the apportionment of some domestic bills for their business element - although your PPR relief should remain intact from waht you've said in the event you move house.
 
Hi There,

Let's simplify this a little ....

Forget about the interest on the loan ...

Forget about putting the wife's name on it also .... and forget about the casual labour.

This would be a commercial enterprise if I intend to gain a profit of 8 to 12 000 euro per year after year 3. I am not out to make a killing but I don't want to spend any more than I have to either. As I am already 10K down already, I believe I can do this account myself as I'm sure lots others do and with your help :) I was to do a farm account course but it got cancelled. It's only 15 acres or so we're dealing with here.

This is something which is supposed to be simple: ie no headaches and maybe turn a small profit in 2 to 3 years.

So that leaves the expense apportioning with regard to diesel, phone, esb.

How are these normally dealt with by "hobby farmers" ? I believe that half the farmers in Ireland are also PAYE workers or at least a good percentage; I believe they have been reffered to as hobby farmers.

Can I apportion ESB/phone/diesel from my normal bills as an expense for this account ? How much is acceptable ? How do I receipt this or are revenue ok with this ?


Thanks for the feedback so far.

It's much appreciated,

Schillachie
 
Hi Schillachie,

Ok, some further clarification:-

Hobby-farming is farming undertaken as a hobby without any trading/profit motive. Any such other adventure, business or concern in the nature of trade is a taxable enterprise, howsoever you want to describe it. Hobbies are undertaken for enjoyment, as is hobby-farming - you would need to be able to prove this to the Revenue's satisfsaction if they came calling.

If you approtion domestic bills to a business - you are telling the taxman that you are using some of your domestic quarters for business purtposes. Hence therefore, on a prima-facie basis you cannot claim full CGT Principal Private Residence Relief on your residence if you sell it as part of it wasn't used for the residence - it was used for the business ! (There are other arguments around this - hence why you need tax advice and not accountancy advice - again i'm speaking as both a qualified accountant and as a qualified tax professional - yah boo sucks to you Ubiquitous).

As a tax-guy I am more interested in your outgoings readying the farm - methinks you could be due a sizeable VAT refund.
 
aetius said:
Hence therefore, on a prima-facie basis you cannot claim full CGT Principal Private Residence Relief on your residence if you sell it as part of it wasn't used for the residence - it was used for the business !
Click to expand...

With respect, this is a total red herring. PPR relief for CGT purposes is affected only if part of the residence is or has been used exclusively for business (ie non-residential) use. It is misleading to pretend that this is an important issue for a small enterprise like a part-time farm, where there should be no need for a dedicated home-office.

That said, as I mentioned earlier, the OP really should be getting proper advice on this and the other questions.

aetius said:
again i'm speaking as both a qualified accountant and as a qualified tax professional - yah boo sucks to you Ubiquitous).
Click to expand...

:confused:
 
If I were you, I would actually go to an accountants - preferably one who advertises tax-expertise (AITI & FITI, being the letters for tax experts). Let them draw up your accounts for the first few years already, be sure to take note of the information you give them, ply them with the q's you have from reading this site, ask them to prepare an Income & Expenditure account, ask them to prep your Income Tax returns for this year and to amend any previous years returns submitted in the event of likely refunds, get a quick lesson in capital allowances from them (what the tax-man calls depreciation and how the tax-man allows it as a cost against profits), and then go for it.

Bear in mind, though very few self-employed can correctly prepare their own tax returns.
 
Ubiquitous - I agree on the 'exclusivety' aspect re CCGT - but, for bullet-point anonymous advice such as what we have here - I prefer blanket prescription advice.

As in - 'you have an issue - get proper advice', rather than lending advice to have the recipient woindering what do you mean by 'exclusive'; does the corner of the room where we have the filing cabinet and computer desk/chair count as exclusive !? What if I surf the web ?

Perhaps you can dole out advice like this - I prefer telling people to seek one-on-one advice from professionals rather than relying upon anonymous posters like you (and me). After all, they say advice is worth what you pay for it - here you pay nothing. For my advice and yours.
 
Hi There,

Thanks for the info.

what would I expect to pay for an Income & Expense account if I have all the receipts etc categorized and account complete except for a couple of entries which may need to be adjusted.

I don't have any machinery just yet for depreciation.

I will also want afew other questions answered on tax back or vat back:)

Ball park ?

I guess if they can get some dosh back for me, it will probably cover their cost :)

Thanks, Schillachie
 
can you pay cash for casual labour, eg cleaning, houskeeping on a regular basis?
What is allowable say per week?
What is allowable say per year?
Can you pay cash directly or withdrawn and recored on bank statemets?
Can you pay by cheque and therefore is recorded?
What is upper allowable limit on all this before you need to put that person payroll, Paye, Prsi etc
Appreciate any help
 
ubiquitous said:
Casual labour (unreceipted or otherwise) is a minefield unless you have operated PAYE/PRSI. The Revenue will go to town on you if they discover otherwise.
Click to expand...

Agreed.


och aye said:
can you pay cash for casual labour, eg cleaning, houskeeping on a regular basis?
What is allowable say per week?
What is allowable say per year?
Can you pay cash directly or withdrawn and recored on bank statemets?
Can you pay by cheque and therefore is recorded?
What is upper allowable limit on all this before you need to put that person payroll, Paye, Prsi etc
Appreciate any help
Click to expand...

You can pay by cash or cheque provided all is recorded and PAYE/PRSI properly operated. There is no allowance or threshold for wages to be paid before PAYE/PRSI kicks in. All payments are subject to proper operation of PAYE/PRSI.
 
Thanks Graham 07
Could you clarify ..."and PAYE/PRSI properly operated"
Can an employer ( self employed) pay cash/cheque for casual labour direct to person(s) and it is up to them to make tax returns?
 
och aye said:
Thanks Graham 07
Could you clarify ..."and PAYE/PRSI properly operated"
Can an employer ( self employed) pay cash/cheque for casual labour direct to person(s) and it is up to them to make tax returns?
Click to expand...

You should be gregistered as an employer, get a propert tax deduction card for the employee or if they do not produce anything, operate emergency tax and deduct tax and PRSI per the rates applicable to the wages paid. The reality however is many people pay a few hundred euro for farm casual labour each year. Many of these people do not operate the PAYE/PRSI as they should given the small amounts. But in strictness they should operate PAYE/PRSI and it is the EMPLOYERS responsibility to do so , not the employee's. Revenue sometimes take a lenient view if the amounts are small and the potential liability small ( eg a student on summer hols where likely liability small anyway due to level of earnings) but that does not remove the legal responsibility to operate the system properly.
 
Thanks Graham
A- Z queries
There is many different types of casual workers and labour types.
So maybe its better to specific on query.
Apologies for long list of questions but it may help many to get a better idea as the area of casual/temorary work is not clear.

I plan on setting up a hostel. So I want to keep things above board.

I would be hoping to get workers who work in exchange for lodgings ( bed & perhaps meals) plus there would be additional hours of work which would require some type of payment, cash or cheque
It seems foreign nationals or student travellers etc would be most interested in above jobs

How are these type of jobs classified ?
(a)partime,
(b)casual,
(c)temporary,
(d) seasonal type
(e) voluntary type
(f)full time.


If I engaged such workers would I be classed as an Employer ?

Is it ok or even legal to pay any of above
g. by cash ? not recorded
h. by cheque ie recored or cheque exchanged for cash but recorded ?
i. Must I pay the minimum wage to all ?
Other

Or if must follow the PAYE/PRSI what precise steps should I take to keep all in order.
Does it involve
j. Getting a person's PPS? ( not sure if all foreign nationals have PPS?
k. Registering same with Revenue ?
l. getting weekly tax card and recording weekly payments ?
m. making payments by cheque or encashed cheque ? to person or his bank ?
n. if under €350/week pay lower PRSI @2%
o. if above €350/wk pay higher PRSI @?
p. do I need to comply with regulations eg
max hours worked?
holiday pay?
Rest periods?
meal times ?
other?
q. even if they have no PPS no or even bank a/c is it best to make payments by enchashed cheques ie cheque paid to Cash but payee recorded on stub for reference/record ?

r.I understand if the total payment to any temporay/seasonal person is approx say €3k-5k for season ( pa) then this is regarded as casual/seasonal and doesnt require PAYE/PRSI regristration ?

s. Since it is best to have all payments/outlays recorded to offset against income what is Best/ compliance method of doing this with above workers in above hostel business.

t. Is there NERA compliance in above?
u. Are there other point that I need cover?
v. Where is best place/web sites to get answers to all the above ?
x.What records do I need to show in the event of workplace inspection?
y. Does it matter whether I live on premises as my abode?
z. I ve just dropped off zzzzzz
Apologies for long list of queries but it would be so helpful to many I know to have clarification on above.

Thanks again.
 
och aye said:
Hi Guys

Got sorted on most of above....lots of angles.....thanks for all the help
Click to expand...

As a matter of interest where did you get most or all of this info would be interested because might interest me at some stage in the future,

Thanks,

Q
 
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