Quick Question Re: Prelim Tax

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leelee

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Hi - my DH just started up as a sole trader in the building industry (end of Aug 2007 when company was registered). Our accountant ask us to make estimate of 3 months earning of which we said 2,000 (as only doing work in evenings.

I work fulltime and have all the marriage credits etc. & my husband had not worked at all this year (was minding our children-home carer).

A letter came from accountants yesterday saying we need to pay 400euro liability to them before 31st Oct ie. 20% of the 2,000.

Can he not use any tax credits at all? I thought you still got to use your PAYE credit of the 1760 (which cannot be transferred when married) or am I wrong - just want to clarify before I ring them.

Thank you.
 
Ring them and ask them - they will be able to explain how preliminary tax works and your various options in calculating it - there's little point in having AAM users wasting their time trying to explain all this for you when you already have an accountant to do this.
 
Is he operating a company or a sole trade?

Companies don't get tax credits and personal allowances.

However, in either case, as he has just commenced to trade, there shouldn't be an obligation to make a payment yet.
 
Thanks.

He is operating as a sole trader so I presumed his liability would be NIL this year as he only started - we have also paid out a lot of money on insurance, prof membership, van, stationary etc.

I just picked them from the phone book and girl dealing with his account seems a bit scatter brain eg. she also told me we had a liability from 2006 - even though she knew he only started to trade in end of August 2007.

I will ring accountant after work (unable to ring from work and husband does not understand any tax so no point in him ringing!)
 
The payment due on 31 October for a sole trader is made up of two elements:

1 - any balance of tax due for 2006 (which in this case will be NIL) and
2 - a preliminary payment for 2007. This must be either 100% of the 2006 payment or 90% of the 2007 liability. As the 2006 payment was NIL, then 100% of that is NIL, so there's no tax payment due until 31 October 2008.
 
Thanks Nige for that. I am not sure what they are up.

Thought by getting accountant that they would look after everything for me.

Will be on the phone when I get home!
 
Let us know what they say. It might be their fee (or part of it) they're looking for.
 
"A letter came from accountants yesterday saying we need to pay 400euro liability to them before 31st Oct ie. 20% of the 2,000."


Did they not include a letter explaining what the €400 was for ? When I send out Prelim Tax notices for clients I include a cover note explaining the rules and how their payment was calculated. The payslip is then attached to that letter with instructions on how to pay it.

Incidentally, you said pay "to them", do you mean the accountants or Revenue. Be mindful that one should never make a cheque payable to ones accountant for anything other than their fees. Any payments due to Revenue should be made payable to Revenue even if passed through ones accountant.
 
Update - called accountants yesterday. Said that we must submit a payment for for Prelim Tax for this year end ie. Dec 2007. (By the way the cheque is to be payable to the Revenue Commissioners).

What they had outlined as €2,000 "profit" was actually his projected "income" that we told them to use for calculation (as he is only starting out and able to work on a part-time basis).

So I have asked for the "profit" to be reduced to €1,000 as we have paid out approx. €2,000 in start up fees with Liability insurance, membership, stationary etc.

And also no tax credits availabe as I, the wife, use all the tax credits!

Thanks for help - I understand everything backwards for an employee on PAYE but when it comes to self-employed it is a new subject, going to download all Revenue guides and have some good bedtime reading!
 
You are obliged to make a preliminary tax payment for 2007, but, based on your 2006 self-assessment liability, that payment can be NIL.

I'd reconsider my choice of accountant if I were you.
 
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