Supplementary P30 / Expenses

Hi folks,

I started a new company just over a year ago for IT contracting and it took me a while to get it all sorted out. I've been paying my VAT but not a salary (nil P30 returns). Now I'd like to back date a salary from when I started but I learned recently that I could be liable for interest on payments if I file supplementary P30 returns for those previous periods. I didn't think it would be an issue but it makes sense I suppose. What sort of interest rates am I looking at here? If it's a huge amount I can just pay the corporation tax on profits and not pay myself a salary until this year which may work out cheaper.

Regarding expenses, if I have bills in the name of the landlord instead of me (e.g. broadband for home office) can I still claim these? Do I need receipts for subsistence expenses or is a travel log sufficient? And if I order computer components are these directly expensible or do they suffer depreciation like normal assets?

I want to get an accountant to look over the accounts after I have all of them in order (to the best of my knowledge) and maybe get them do my first CT1 / Annual Return / Form 11 and advise on a pension etc. but after that I would just file everything myself. Would many accountants accommodate this?

Hi Flibber

If you have not paid yourself a salary in these P30 periods, then I would not suggest you go back and pay yourself a monthly salary.

You have a few options:

1 - Accrue a salary to yourself in the last period of the accounts (assumed to fall in 2011 if company was set up just over a eyar ago) and pay the taxes on that. This will fall into the 2011/12 P35 and will not cause any issues. This salary does not have to be paid to you now but can be owed to you by the company via the director's loan account and can be paid to you over time when the company has money.

2 - Forget about posting it through the 1st year accounts and pay yourself a double salary in 2011 to make up for it.

With regard to the expenses, if they are legitimate business expenses that you have incurred on the company's behalf, you are entitled to file an expense claim to your company which you will be reimbursed for. This could include the broadband.

Subsistence is only paid to an employee when they are away from the place of work for a certian period of time. For more information, see revenue.ie/en/tax/it/leaflets/it54.html

Computer components, if they are of small value, would normally be expensed in the P&L and not deemed to be assets. Also, if they to be sold or sold as part of a service to a customer, they would be classified as part of cost of sales.

If you wish, I can cast an eye over your accounts and provide guidance on the corporation tax returns etc.

Regards
Eamonn
0876562528

Thanks Eamon.

I did actually make sales for the end of 2009 and most of 2010. If I don't pay myself a salary until 2011 does that mean I have to pay corporation tax on any income I made in these two years, since it would be mostly profit as I didn't pay myself a salary.

Of course you should take a salary. Maximising your bands, reducing your CT, PRSI contributions for state contributory pension, termination payments, etc.

Aye, I will be paying myself a salary in future, it's just that for the period of 09-10 i was making sales but paying myself no salary, so there was profit in the company. If I want to pay myself a salary for that period (e.g. file a supplementary return for say november '10 for an accrued salary) then I could be hit by late paye payment penalties. If I keep the money in the company to avoid late paye penalties and pay an accrued salary sometime in 2011 instead then I'll have a corporation tax hit on all profits i made in 09 and 10 (I think?).

I just want to know which will make the most sense to do - if there's no or very light penalties for the late paye payment then I'll just do that. If its a heavy fine then it might be better to take the corporation tax hit. I don't really have any reason to keep much profit in the company.

I was onto revenue there recently but I was told each case is dealt with individually so there's no real way of knowing without filing the P30/P35 and seeing what happens.

If you pay yourself such a salary in 2011 that itcreates a loss, you can set this back against the previous year's profits and reclaim CT paid for 2010. You might look at the figures and see is this possible.

Unfortunately my second CT1 is for Nov/Dec 2010 because I changed the dates for my first CT1 from Nov-Dev 09 to Nov 09 - Nov 10 so I don't think this will work.

Its acceptable to file a supplementary P35 upto June without penalties.

Are you saying that your 2nd CT1 is for a 2 month period v a 12 month period last year? Depending on the figures, you may still carry back losses.

yeah, it's on ROS like that anyway. i think it was done that way so my subsequent CT1s would be Dec-Dec.

If I won't get hit on penalties on the P35 then I'll just do it that way, the accounts would be a lot simpler.

FYI - You can change your CT1 dates by contacting your local Revenue office. They can't exceed 12 months.

You don't necessarily have to contact Revenue in order to change your CT1 accounting periods. Just file the return(s) for the period(s) you select.