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Thomas McGibney & Company | |||
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Main Street, Virginia, Co. Cavan. Phone 049 8549966 |
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Self Assessment for Income Tax & Corporation Tax - The BasicsIncome TaxIncome
tax is payable on the annual profits or gains of individuals (not
companies) from business and other taxable income, for each tax
year. The tax year now runs on a calendar year basis – i.e. it
begins on 1st January and ends on 31st
December each year You
will normally be taxed on the profits of your accounting year e.g.
the year in which your annual accounts are made up to a date in that
tax year. For example if your accounts are for the year ended 31st
August 2003, they will form the basis for your tax liability for the
tax year 2003. There are special rules covering the commencement of a new business, and for businesses ceasing to trade. Please contact us for further details. S
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Pay
Preliminary Tax (your estimate of the income tax payable) by 1
November each year | |
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Make
a tax return for each tax year by 31st October in the
following tax year. e.g. For 2002, by 31st October
2003. | |
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Pay
any balance of tax due for a tax year on the same date as the
tax return due date |
There is no compulsion on a
new business to pay Preliminary Tax in its first year in business.
However, business-owners
should make provision for their income tax liability for that year,
in order to avoid cashflow problems later on, when the tax becomes
due for that year.
We
can arrange with the Collector-General for you to pay your
Preliminary Tax by direct debit in equal monthly instalments.
After
the Revenue receive your tax return, they will issue a Notice of
Assessment to you which confirms your tax position for the year. If
you have overpaid tax for the year, it will normally be refunded to
you after this Assessment is issued.
If
you fail to submit your tax return by the due date, you will face a
surcharge on your final tax bill for the year. The surcharge is:
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5%
of the tax up (max. £10,000) if the return is made within 2
months of the due date. | |
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10%
of the tax (max. £50,000) if the return is made after 2 months
of the due date. |
No surcharge is applicable to new businesses, if the Year 1 return is made by the return filing date for Year 2.
Companies
pay Corporation Tax, which is taxed on company profits, including
both income and chargeable gains.
A
company’s taxable income is calculated under the same rules as
those applying to individuals under the Income Tax code. Chargeable
gains are calculated in accordance with Capital Gains Tax rules.
Company
losses can only be set off against other company income, or against
future or past profits (subject to conditions).
If
you are trading through a company, you cannot offset any loss
against any your personal income.
The
self assessment system applies to companies, in much the same way as
it does to individuals, but with certain important differences..
From
28th July 2002, onwards Companies must calculate and pay
their annual Corporation tax bill, one month before the end of their
accounting year (the
period for which the company makes up its accounts)
Until
and including 2005, companies will have to make up to three
Corporation Tax payments each year:
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The
“Current Year Payment” of 20-80% of the final liability, as
follows: |
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Year
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%
of Final Liability payable in Current Year Payment |
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2002 |
20% |
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2003 |
40% |
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2004 |
60% |
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2005 |
80% |
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2006 |
100% |
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90%
of the final liability (less the “Current Year Payment”)
within six months of the end of the accounting year | |
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The
remaining 10% within 1 month of receiving the Notice of
Assessment from the Revenue. |
By
2006, the full Final Liability must be made in the “Current Year
Payment”
Interest
is charged on late or insufficient payments of Preliminary Tax.
A
company must prepare and submit a tax return (Form CT1) within nine
months of their year-end.
If
the company fails to submit a tax return on time, a surcharge will
be imposed. The surcharge is the same as for income tax. Late
submission of the From CT1 may affect the company’s ability to
claim certain reliefs and allowances.
If
you set up a company, the company will be obliged to register for
and operate PAYE/PRSI on your salary as a director. Directors will
be taxed according to the Income Tax code, on a similar basis to the
self-employed.
Shareholders will have to pay income tax on any dividends received from the company. Shareholders can avail of certain tax credits which they can offset against this tax.
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Starting a New Business? Take a look at our Guide for New Businesses! |
| Look before
you Leap!
Please note that this guide is for information purposes only and no responsibility can be accepted for any errors or omissions. |
| We can
help!
If you need further information, advice or guidance on how the Tax system works, please contact McGibney & Company today!
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