Tax and Self-Employment

This sections aims to support you with various aspects of tax and Self-Employment

Tax and Self-Employment

Starting Off

When you are first setting up your service you need to advise Revenue that you are starting a business – whether you are operating as a company or not will determine the type of tax that you pay.

The Revenue commission has produced a tax guide to starting your own business, which could be a very valuable tool when starting off.

Registering as Self-Employed

When you are self employed you are legally required to do carry out the following steps in relation to your tax:

  • Register for Income Tax – In order to set up as a sole trader you must register as self-employed for income tax with Revenue. You can do this by downloading and completing the tax registration form TR1 from the Revenue. You will then receive a “Notice of Registration” confirming that you are registered for income tax.
  • Register for VAT – You must register for VAT when your turnover exceeds €37,500 in a 12 month period for the provision of services or €75,000 in a 12 month period for the provision of goods. The form mentioned above will also allow you to register for VAT.
  • Register for PAYE/PRSI – Self Employed individuals are required to pay the correct PRSI contributions to sustain their entitlement to a number of Social Welfare payments including Widow’s, Widower’s or Surviving Civil Partner’s Contributory Pension, Guardian’s Payment (Contributory), State Pension (Contributory), Maternity Benefit, Adoptive Benefit and the Standard Bereavement Grant. If you are self-employed you are automatically entered into Class S PRSI contributions. The Department of Social Protection has published a useful summary titled PRSI for the Self-Employed – SW 74.

Government Funding and Tax Clearance

To access government funding such as ECCE, CCS and CETS schemes, you will need to obtain a Tax Clearance Certificate from Revenue.

A Tax Clearance Certificate is a written confirmation from Revenue that a person’s tax affairs are in order at the date of issue of the Certificate.

Claiming Relief

If you are just starting off you may be eligible for tax relief or there may be tax-efficient ways of raising capital that you can take advantage of.

There is a 3 year corporate tax exemption for new qualifying companies which states that

“…for an accounting period (which) does not exceed €40,000, the aggregate amount of corporation tax referable to income and gains of the qualifying trade in that period will be reduced to nil…”

Marginal relief applies in cases where the tax liability is between €40,000 and €60,000.

Pay and File

Under the ‘pay and file’ system, October 31 is the tax deadline for self-employed workers and contractors. If you fall within this category you must do the following 3 things by the deadline:

  1. File your tax return for the previous year
  2. Pay any balance of income tax owing for the previous year
  3. Pay any preliminary tax for the current tax year

If you are on the revenue records as self-employed, you should automatically receive a pay and file slip from the tax office to enable you to pay the tax by the due date. If you do not receive a slip you should request one because under self-assessment the obligation is on you, not Revenue, to ensure your return is filed, and your tax is paid, on time.

Revenue Online Service

If you decide to file online, rather than using the traditional paper route, you will get an extra 2 weeks, with the deadline for filing the return AND making the Payment extended until November 15, where both the Return and the Payment are made through the Revenue On-Line Service (ROS).

However, you must to remember that in order to use this service you need to register for it in advance. This is a 3 stage process which may take some time.

After Having Made Your Tax Return

After you have made your tax return Revenue will issue a Notice of Assessment for a tax year in accordance with your tax return for that year. This will show your total tax liability for the tax year.

The Preliminary Tax paid by you for the year in question will be credited against your final liability for the year. Provided you had paid adequate Preliminary Tax, the due date for the payment of any additional tax is 31 October in the year following the year of assessment. If you have overpaid your tax it will, subject to relevant time limits, be refunded to you or offset against your other tax liabilities.

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