A few specific Tax Q's for sole trader.

I have registered as a sole trader ~ 9 months ago, and It is just now that I'm starting to see some income from the business. (I'm also a PAYE worker), I'm not registered for VAT. I have some questions and was wondering if anyone could help.

I have only just recently opened a separate current account for the business (should have done this at the beginning??) and I have been paying business expenses out of my personal current account up to now.

1. I rent my home currently(€750 pcm), a three bed house. I have converted 1 bedroom into an office in which I do almost exclusively work relating to the sole trader business. Can I sublet this room to myself? Are there tax issues with paying myself rent say €250 pcm? Can I write a cheque from the new 'business' a/c made payable to myself for rent over the length of time I've been using the office?

2. I drive a van, and I do ~ 25% of my mileage for the sideline business. I have been paying for 100% of diesel used out of my personal bank account but have been keeping receipts. What is the best way for me to account for the fuel expenses used in the side business?

Any other expenses I may not have thought of that I can offset against profits?

Thanks in advance for your help.

M

Firstly, depending on your customer base and your costs, it might be advisable to register for VAT even if you don't meet the threshold whereby you would be obliged to do so.

Secondly, it is not too bad that you have only opened a business account now, so long as you have been keeping records of your business expenses. Going forward, try to keep the payments separate as it will make your accounting easier.

In relation to your rent, you cannot pay yourself rent (you just can't "trade" with yourself). However, you could claim a portion of the rent as a business expense. About €200 per month should be reasonable. A portion of the light and heat expenses can also be claimed as business expenses and reduce your taxable profit.

In respect of your van, it would probably be best if you kept a log of business mileage for each month and then claim that proportion of expenses (total mileage on the van should be recorded at the beginning of each month).

Other costs - well, get yourself and accountant and you can claim their fees. Have you a computer, desk, phone etc for this business? You can claim capital allowances on the assets (write the assets off over 8 years).

Hi Nige,

Thanks for the response, the work I'm doing is for people who know me through my normal work and I don't think it makes any difference just yet to be VAT registered, perhaps next year I might go down that route.


Also another question if you don't mind, since I've been paying for supplies etc from my personal current account and I'll be lodging the income to my business account, Could I just make business cheques out to myself for the individual invoices I've paid for already from the personal account?

Or would there be some sort of paper trail issue with this?

Thanks

M

Making cheques out to yourself would be just daft.

Just keep all invoices and record those purchases you make, so that they are all taken into account when doing your business accounts.

If you think this business is going to start making good money, have you considered incorporating a company?

Nige said:

Making cheques out to yourself would be just daft...

Click to expand...

Normally I would agree with this as it will only get messy and start to look dodgy. However, I was in a similar position last year. I had been PAYE and running as a sole trader at the same time. A month or two before I set-up the business I spent some money on my personal visa for services I was going to need for the business (e.g. business name registration, web hosting, etc). Half way through the year (when I finally got round to looking at the books ) I just wrote myself a cheque from my sole trader bank a/c to cover what I'd spent on my visa. It was only about €300 but it was legit business expense and the accountant never mentioned it when they did my returns that year so I presumed all was good.

As anyone will tell you though, there's no substitute for professional advice.

I was thinking about a bit more, around 2.5K that I've spent on supplies for various jobs I was doing.

The personal account is running close to being overdrawn because of this.

I would imagine that it shouldn't matter how much it is, rather the fact that you can justify it. If they are all legit expenses and you have receipts then I can't see a problem. Once the purchases were made a reasonable time before the start-up, i.e. 3-6 months or so.