Starting a business can be a daunting experience for any entrepreneur. One aspect of starting a business which is often overlooked by entrepreneurs is the tax compliance obligations set down in Irish tax legislation.
Unlike the majority of the working population in Ireland who receive a salary through PAYE employment and have their tax deducted at source by their employers, entrepreneurs are obliged under Revenue’s self assessment system to prepare tax returns, calculate their tax and pay this tax to Revenue by certain prescribed deadlines. These tasks can be time consuming and entrepreneurs should familiarize themselves with important tax filing and payment deadlines. Revenue’s website provides detailed information on the obligations of taxpayers starting a business. It is worth nothing that failure to meet these tax filing or payment deadlines can result in significant penalties and interest payments.
One of the first steps you should take when setting up a business is to register that business with Revenue. This is done by completing a tax registration form. On this form you will provide detailed information about your business to Revenue, in addition to deciding which tax heads your business is registering for (e.g. Income Tax, Value Added Tax, Corporation Tax, PREM). If you are setting up as a sole-trader, you will complete a Form TR1 and if you are setting up an incorporated company, you will complete a Form TR2. Both of these forms are available online on Revenue’s website and can be submitted through Revenues Online Service (“ROS”). If you are not already registered for ROS, you should complete this registration at the outset of your business venture. ROS will allow you to make tax payments and file all tax returns online. There is a ROS helpdesk where taxpayers can call to ask any questions on ROS or if they are having difficulties operating this service.
There are many tax questions an entrepreneur should ask themselves when setting up a business. If possible, it would be prudent to seek tax advice to ensure that all tax compliance obligations are being met. For example, one question that should be considered is whether the taxpayer should register for VAT. If you anticipate that your business’ turnover will be in excess of EUR 75,000 (supplying goods) or EUR 37,500 (supplying services) in a twelve month period you will breach the VAT registration threshold and you will be obliged to register for VAT, submit VAT returns and make VAT payments (if applicable) to Revenue. However, some types of business are considered “VAT exempt” and therefore there is no requirement to register for VAT, regardless of the business’ turnover. There are also significant VAT administrative responsibilities on the taxpayer, such as filing informational returns such as VIES returns, which deal with when a taxpayer makes cross-border supplies of goods or services from one EU member state to another.
In conclusion, there are significant tax obligations on an entrepreneur when starting a business. Keeping good books and records (e.g. sales and purchase invoices, bank statements) will ensure that proper accounts can be prepared for the business and this will assist in correct tax returns and payments being submitted to Revenue. While paying for tax advice at the outset of a business venture may seem like a costly expense a fledgling business can not afford, it is arguably a cost worth incurring to avoid becoming liable to Revenue surcharges, interest payments and penalties for failure to comply with what are oftentimes considered complex tax obligations. Many businesses only address tax compliance concerns when something goes wrong. This is the wrong approach to take. Start-up businesses should set time aside to consider their tax obligations. Revenue’s website is a good place to start: www.revenue.ie