Sole Trader questions

Hi all,

I have been reading through this site for a while and you guys seem very helpful, so maybe you could help me.

I have just set up a business as a sole trader and have a few questions.

What is the best method of keeping VAT/Income tax in order. I send out about three to five invoices a week so I'm not dealing with a lot of VAT.
I was thinking of getting a folder with A4 pages and having a page for every two months of what VAT I take in on one side and what goes out on the other. And at the end total it up and that's what goes to the VAT man. Is there anything wrong with that or do the books have to be in any particular format or any particular type of book.

Can I also keep track of monies in and out of the bank this way?


Also, I have a small office set up in my parents house, in a spare room.
I give them €50 Per week for electricity, heating and the use of their wireless broadband. Is there anyway of making this payment tax deductible considering I don't get any receipts? My father is on a state pension so I'm concerned it could have some implications for him financially.

Thanks in advance.

Hi Dean,

You are required to keep proper books of account. It is not specified anywhere, whether these have to be handwritten, typed etc. An A4 page, with all the details for each month/week, keeping details of sales/lodgements/purchases/payments will cover most of the information you require.

In reply to your final query, there are a couple of issues to consider. Rent a room relief does not apply between a parent and a child, so therefore any deductible payment you make to your parents would be taxable. The view generally taken is that payments for "rent" made by an adult child is actually a reimbursement of expenses and is not considered taxable.

You could consider separating the bill for broadband from the regular telephone bill and putting it in your name, and deducting a portion of the bill for business purposes (50 - 70%)

Hope this helps,

Regards,

Past30

www.freshbooks.com
www.getharvest.com

worth a few euros to keep everything in order.

Past30Now said:

Rent a room relief does not apply between a parent and a child, so therefore any deductible payment you make to your parents would be taxable.

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I thought rent a room relief only applied for living accomodation and not business purposes.

While the payments to the parent would be taxable, if your father's only income was the state pension and he was receiving 2,600 (50 pw) rent, then it is extremely unlikely that he would have any tax liability as his income would be less than the income tax threshold. It could give rise to CGT issues if the father ever decided to sell the house, as it was not fully used as his principal private residence.

Furntech said:

www.freshbooks.com
www.getharvest.com

worth a few euros to keep everything in order.

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These both look like US programs and it does not seem they do VAT, if the OP decides to use software there are plenty of packages designed for the Irish market which would be more suitable.

Thanks for the replies everyone.

I would be interested in a very simple to use programme that would keep track of customers details, invoices, accounts etc. It would also need to incorporate the Irish system.


Regarding my weekly payment of 50 Euro, as this payment is a non-profit payment to my parents, as in, it only covers their expense in keeping me in my office. Can I not keep a record of it without receipts?


Also, another question for you guys.

My business is running about two month now, and I have been living off some cash I had saved at home, for the mortgage, bills etc.
I have not withdrawn anything from my business account yet as I haven't needed to.
A friend of mine advised me that the revenue would question that and would question where I got the money to live from, is this the case?

I hope I'm making sense and not coming across badly.

Many thanks.

Dean the 3rd said:

A friend of mine advised me that the revenue would question that and would question where I got the money to live from, is this the case?

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They could question it in the event of an audit, but if the money you have saved has come from legitimate sources and tax has been paid on it, i.e. wages from before your self employment, then you should have nothing to fear. Low drawings can attract attention from the revenue, but if your business is only going for 2 months then you have pleanty of time before your year end to take drawings.

Joe1234 said:

I thought rent a room relief only applied for living accomodation and not business purposes.

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Sorry, I assumed he was living there also and suggesting that the payment to his parents could be viewed from their perspective as rent from him.

OK thanks everyone, I really appreciated the help.

Just to be clear, Can I claim for this payment or not? and they could see that I'm not claiming for ESB or Gas would that make a difference?

Thanks.

Dean the 3rd said:

Just to be clear, Can I claim for this payment or not? and they could see that I'm not claiming for ESB or Gas would that make a difference?

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You can claim it. However the corollary of this is that they will have to declare it for tax/welfare purposes, and would be expected by the various State authorities to do so. You will have to weigh up the pro's & con's yourself.