Preliminary Income tax and Revenue DD scheme

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sandyh2001in

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[FONT=Default Sans Serif,Verdana,Arial,Helvetica,sans-serif]Hi

I am registered for the Revenue Direct debit scheme. I pay myself a monthly salary upto the standard rate limit of 20 % and the monthly tax outgo to Revenue is in line with that. However, excess profits are steadily building up in the company and I want to extract them all at year end (with December salary around Dec 15). Question is that rules of DD scheme require 90 percent of the tax for the year to be paid by Oct 31 as preliminary Income tax. Can i continue paying the small tax commensurate with the standard rate income until November and get a massive salary in December and pay the large tax with the tax debit for December in January? Will there be penalties for not paying 90 percent tax for 2012 by 31st October?



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Your salary will be subject to PAYE so no need to query Income tax rules which only apply to the self employed. The 90% rules dont appear to apply to you.
 
sandyh2001in said:
you mean pay(tax) as you earn? makes sense
Click to expand...

Yes, the company deducts tax at source (PAYE system) leaving you with the net and tax obligation satisfied, increasing or decreasing this amount has nothing to do with preliminary tax system for the self employed.
 
Hold on now, I think you and Bazermc may be talking at cross purposes.

Who's paying these DDs; you personally (income tax), or the company (PAYE/PRSI as an employer)?

The DD scheme you described doesn't exist for income tax, as what you're obliged to pay is 105% of your previous years' income tax liability. The 90% rule applies to people who are NOT in a DD scheme and have to make a prelim tax payment by 31st Oct.

You're either conflating 2 things that don't relate to each other, or wrongly not operating PAYE on your salary, but either way you'll need to clarify who's paying what in order to get an answer here!
 
sorry ill provide more info...
its my own limited company,Im the Director, pays me monthly salary and also is registered for DD scheme with Revenue, so Revenue DD the company account monthly based on the salary that was paid out to Director (me!)

So back to the question, the company will pay me a large salary at end of year but upto 31st Oct the current tax debits in place satisfy the small PAYE salary its paying me and the tax withheld for it.

how will it work?
 
sandyh2001in said:
sorry ill provide more info...
its my own limited company,Im the Director, pays me monthly salary and also is registered for DD scheme with Revenue, so Revenue DD the company account monthly based on the salary that was paid out to Director (me!)

So back to the question, the company will pay me a large salary at end of year but upto 31st Oct the current tax debits in place satisfy the small PAYE salary its paying me and the tax withheld for it.

how will it work?
Click to expand...

OK, now that we've cleared that up..! :

First thing's first, the 31st October has nothing to do with the DD scheme for employers paying PAYE/PRSI.

The rules of the DD schemes for PAYE/PRSI and VAT state the following:

[broken link removed]

"Obligations with Direct Debit
You are obliged to submit the annual return by the due date. Where the return is not submitted, liabilities will be estimated and collection will be pursued, using enforcement where necessary. The facility to pay by direct debit may be withdrawn.
Where insufficient amounts are paid by direct debit and there is a balance of tax payable at the end of the accounting year, interest is payable if the amount is not paid by the due date. In addition if the amount due exceeds:

  • 20% of the annual liability for VAT, or
  • 10% of the annual liability for PAYE/PRSI,
interest will be back-dated to the mid point of the accounting year."

So in your case the annual return is the P35, due by mid-February. You may be hit with an interest charge if the DD's paid for January-December 2012 do not cover 90% of the total liability returned on the P35.

The simple way around this is for the company to make an additional payment (by cheque / ROS debit instruction etc...) in January to cover the additional PAYE/PRSI on the December salary.
 
mandelbrot said:
OK, now that we've cleared that up..! :

First thing's first, the 31st October has nothing to do with the DD scheme for employers paying PAYE/PRSI.

The rules of the DD schemes for PAYE/PRSI and VAT state the following:

[broken link removed]

"Obligations with Direct Debit
You are obliged to submit the annual return by the due date. Where the return is not submitted, liabilities will be estimated and collection will be pursued, using enforcement where necessary. The facility to pay by direct debit may be withdrawn.
Where insufficient amounts are paid by direct debit and there is a balance of tax payable at the end of the accounting year, interest is payable if the amount is not paid by the due date. In addition if the amount due exceeds:

  • 20% of the annual liability for VAT, or
  • 10% of the annual liability for PAYE/PRSI,
interest will be back-dated to the mid point of the accounting year."

So in your case the annual return is the P35, due by mid-February. You may be hit with an interest charge if the DD's paid for January-December 2012 do not cover 90% of the total liability returned on the P35.

The simple way around this is for the company to make an additional payment (by cheque / ROS debit instruction etc...) in January to cover the additional PAYE/PRSI on the December salary.
Click to expand...

Great thanks,
 
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