Registering as a sole trader

[alanmc]

I want to register as a sole trader and pay preliminary tax for 2012. Ì did not complete a TR1 form when I commenced trading in March. If I submit the form now will that cause a problem with revenue?
I am also a bit confused about Q17 on the TR1 form? What date should my annual accounts be made up?
I am aware that I missed the pay and file deadline and am wondering if I will face a penalty?

 

[Joe_90]

Usually the accounts are for 12 months from the date of commencement so Feb 13.
There is no penalty for not paying your tax on time. You may be charged interest for late payment.

 

[mandelbrot]

If you only become a self assessed taxpayer for the first time in 2012, then a Nil preliminary tax payment is acceptable, as you can base it on your prior year's liability (which is Nil if you weren't self assessed).

 

[T McGibney]

Usually the accounts are for 12 months from the date of commencement so Feb 13.

Not an advisable strategy unless the OP is comfortable with the likelihood of being charged tax twice on their first 10 months earnings.

 

[Gervan]

unless the OP is comfortable with the likelihood of being charged tax twice on their first 10 months earnings

But if you had a start up loss, as many new businesses do, would you get to use the loss twice, possibly as relief against total income for self and/or spouse?

 

[T McGibney]

But if you had a start up loss, as many new businesses do, would you get to use the loss twice, possibly as relief against total income for self and/or spouse?

If its a loss-making startup, how come he wants to pay Preliminary Tax?

 

[Joe_90]

Not an advisable strategy unless the OP is comfortable with the likelihood of being charged tax twice on their first 10 months earnings.

I don't buy that arguement.

Assuming the profits are increasing say profit is 1000 per month in year one and 1500 per month in year 2, 2000 per month in year 3

Using feb as a year end.
The 2012 assessable profit is 10,000
The 2013 assessable profit is 12,000
The 2014 assessable profit is 18,000

Using December as I presume you are suggesting
The 2012 assessable profit is 10,000
The 2013 assessable profit is 17,000
The 2014 assessable profit is 23,000

There is no second year review by Revenue on commencement.

The final year review on cessation will have to dealt with but that can be managed.

Or am I missing something.

 

[smeharg]

...
Or am I missing something.

Yes. Using a December year end the year of asssessment 2014 would include profits arising between March and December 2014; whereas using a February year end those profits are taxed in the year of assessment 2015, ie the profits for the year ended 28 February 2015.

If the trade ceased in February 2015 the total actual profits as taxed using a December year end would be 54k. The profits taxed using a February year end would be 64k. The option to re-assess the year prior to cessation wouldn't apply as the actual profits arising in that year would be greater than were originally assessed.

 

[Joe_90]

Yes.

Where are you getting the 64k from?

Using a feb year end I make it €49k
2012 €10,000
2013 €12,000
2014 €18,000 but Revenue will reassess to actual €23,000 because of cessation in 2015
2015 €4,000

 

[smeharg]

Where are you getting the 64k from?

Using a feb year end I make it €49k
2012 €10,000
2013 €12,000
2014 €18,000 but Revenue will reassess to actual €23,000 because of cessation in 2015
2015 €4,000

Sorry my mistake. You're right, in a cessation the total would be 49k.

The 64k comes from what would be assessed up to Feb 2015 on a continuing basis not in a cessation. Whereas, the actual profits up to that point would be 54k.