Top Tax Tips for Start-Ups

  • Pay your tax on time. This way you avoid any unnecessary interest and penalties.
  • If your spouse helps in the business you can pay them a salary, getting full use of the tax band.
  • Pay your teenage child as a summer job. If it’s full-time there will be no PRSI cost.
  • Claim an element of your household expenditure (phone, internet, light & heat) as an expense.
  • Make sure to claim all relevant tax credits. Click here to view the current list of credits.
  • Invest in a pension. There are significant tax incentives on offer here. The value of your pension also grows tax-free.
  • Rent out a room in your home up to €12,000 tax-free.
  • If trading through a limited company use your own car and charge mileage to the company. Benefit in kind (BIK) on personal use of company cars can be extremely high.
  • If you are over 55 years of age you may qualify for Retirement Relief if selling your business.
  • Always use a qualified accountant or tax adviser. They will ensure that tax is calculated correctly and submitted on time.
  • Make sure to register for VAT where appropriate.
  • If you’re a sole trader, pay your income tax by way of monthly direct debit. This will help with cash flow management.
  • Pay your VAT liability by monthly direct debit. Again, this will help with business cash flow management.
  • Remember, client entertainment expenses are not allowable as a business expense.
  • Membership of your local gym or gold club, paid through your company, will be liable to BIK.
  • Permanent Health Scheme contributions are tax deductible.
  • As a start-up you may be exempt from income tax if you have been previously unemployed.
  • Does your company carry out any element of ‘Research & Development’? There are great tax credits available here.
  • As a start-up your company may be exempt from tax on its profits (Corporation Tax).
  • Why not invest in the bike-to-work scheme? Keeps you healthy and can be claimed through the company.
  • If you’re paying maintenance to a former spouse (not your children) you may qualify for a tax credit on any payments made.
  • Instead of paying costly bonuses to key employees, why not give them shares in the business using the ‘Employee Share Options’?
  • VAT can be claimed on the purchase of a commercial vehicle.
  • Don’t forget the single gift allowance of €3,000. You can receive this amount tax-free every year from any number of (generous) people.
  • If your business is looking for investment, look at the great tax incentives available through the EIIS Scheme.
  • Look at reclaiming tax at 41% through SURE (Startup Refunds for Entrepreneurs).
  • As a growing business, why not hire outside contractors instead of in-house staff? This way you can avoid costly employers’ PRSI costs.
  • If you want to incorporate your sole trade to a Limited Company you may qualify for relief from CGT (Capital Gains Tax) if you transfer all of the assets.
  • You may also qualify for the reduced 10% CGT Entrepreneur Relief. For more details please click here.
  • If you discover a tax problem it’s always advisable to hold up your hands with Revenue. They will look on your case far more favorably than if you try to hide the issue.
  • As a start-up, do not invest large sums into your company as share capital and then use this money to pay your wages. Instead loan the money to the company and take it back (tax-free) when funds allow.
  • Remember, as a proprietory director (i.e. owning more than 15% of the shares) you are obliged to submit an annual income tax return to Revenue every October.
  • If you are carrying on an exempt activity (food and drink, books and booklets, children’s clothes & footwear) you can still register for VAT. This way you can reclaim any VAT on your purchases.
  • If you supply both goods and services (i.e. photographer) you will be taxed to VAT under the two- thirds rule.
  • Be careful: not all business purchases automatically qualify for a VAT deduction (e.g. car hire, petrol, hotel costs).
  • If your customer is a government agency be sure to retain your Form F45 in order to claim professional services withholding tax (PSWT).
  • If you’re an artist you may be exempt from income tax.

VAT rates

Current VAT rates

The current VAT rates are:

0% (the zero rate).

4.8% (the agricultural rate). This applies to supplies of live cattle, deer, goats, greyhounds, horses, pigs and sheep.

13.5% (the low rate). This is reduced to 9% for certain goods and services.

23% (the standard rate). This rate applies to goods and services that are not exempt, or specifically liable at 0%, 5.2%, or 13.5%.

A rate of 5.2% (the farmer’s flat-rate addition) applies to supplies of agricultural produce by flat-rate (i.e., unregistered) farmers.

 

Zero rate

The goods and services chargeable to VAT at 0% are:

Intra-Community transactions

  1. Supplies to a VAT-registered person in another EU State.
  2. The supply of new means of transport, dispatched or transported to a person in another EU State.
  3. The supply of excisable products, dispatched or transported to a person in another EU State.
  4. The transport of goods within the EU to and from the Azores or Madeira.

Imports

  1. Goods imported from outside the EU consigned to another EU State.
  2. Transport of goods imported from outside the EU (provided the customs value of the goods includes the transport charge).

Exports

  1. The export of goods to a place outside the EU.
  2. Carriage of goods within the State where part of a contract to transfer the goods to a place outside the EU.
  3. Goods supplied to an authorised exporter.
  4. Work on movable goods brought from outside the EU for the purposes of such work.

Services relating to vessels and aircraft

  • The provision of port or airport facilities (docking, landing, loading, unloading) for passengers and
    goods.
  • The supply, modification, maintenance, repair, chartering and hire of sea-going ships of more than 15 tons and international commercial aircraft.
  • The supply, maintenance, repair and hire of equipment for use in sea-going vessels in (2).
  • The supply, maintenance, repair and hire of equipment for use in aircraft in (2).
  • The supply of fuel and provisions for a sea-going ship or international commercial aircraft.
  • The supply of navigation services by the Irish Aviation Authority.

Transactions treated as exports

  • The supply of goods or services to certain international bodies.
  • The supply of gold to the Central Bank.

Services by intermediaries (1)

Export agency services.

  • (2) Export agency services include services in relation to: carriage of goods to or from the Azores or
    Madeira; carriage of goods in transit to a place outside the EU; provision of docking, landing, loading or
    unloading facilities; the supply, maintenance, hire and repair of equipment for sea-going vessels; the
    supply of gold to the Central Bank.
  • (3) Intermediary services in relation to the travel agent’s margin scheme.

International trade etc.

  • The supply of goods by a VAT-registered person in a free port to another such person.
  • The supply of goods by a VAT-registered person in the Shannon zone to another such person.
  • The supply of goods to be transported directly or on behalf of the supplier to a VAT-registered person in the Shannon zone.
  • The supply of traveller’s goods (goods brought abroad by a traveller in accordance with the retail export scheme), provided the conditions are met.
  • VAT repayment services in relation to traveller’s goods.
  • The supply of goods in a tax-free shop to travellers departing the State to a place outside the EU.(7) The supply of food, drink and tobacco, to passengers travelling to another EU State, for consumption on board the ship or aircraft.
  • The supply of goods and services to a qualifying export business.

Food and drink

    • Food and drink for human consumption, excluding:
      • alcoholic drinks,
      • tea, coffee, etc. in drinkable form,
      • ice cream, frozen desserts, yoghurts, cereal or grain savoury products,
      • potato crisps, popcorn, salted or roasted nuts,
      • chocolates, sweets, biscuits, confectionery, but not plain bread.
  • “Supplying food and drink” includes supplying food without drink and vice versa.

Certain printed matter

Printed books and booklets, but not newspapers, stationery, albums, and books of stamps, coupons or tickets.

Children’s clothing and footwear

      • Children’s clothing, i.e., clothing of sizes not exceeding the size appropriate to a 10-year-old child of average build.
      • Children’s footwear, i.e., footwear of a size not exceeding the average size for a 10-year-old child.
      • A 10-year-old child means a child under eleven years of age.

Medicine, medical equipment and appliances (1)

Medicine for human oral consumption.

      • (2) Medicine for animal oral consumption (but not for pets).
      • (3) Invalid carriages and appliances, and artificial body parts (but not artificial teeth, corrective spectacles,
        and contact lenses).

Fertilisers, feeding stuffs, certain seeds etc (1)

Animal feed other than pet food.

      • (2) Fertiliser supplied in packages of 10kg or more.
      • (3) Food-producing trees, plants, seeds, spores, bulbs, tubers, tuberous roots, corms and rhizomes.

Other zero-rated goods and services

      • Lighthouse and navigation services provided by the Commissioner of Irish Lights.
      • Life saving services provided by the Royal National Lifeboat Institution.
      • Sanitary towels and tampons.
      • Air traffic control services supplied by the Irish Aviation Authority.
      • Plain white wax candles and night lights.

Low rate

(13.5%, but 9% as regards services marked *)

The goods and services chargeable to VAT at the low rate are:

Food and drink for human consumption*

(1) Food and drink provided for human consumption by a vending machine, or in the course of catering (i.e., in the course of operating a hotel, restaurant, canteen, pub, catering or similar business).

(2) The supply, in the course of catering, of ice cream, frozen desserts, frozen yoghurts etc., potato crisps, popcorn and salted or roasted nuts, and non-alcoholic drinks.

(3) Hot takeaway food.

(4) Hot takeaway food does not include bread that does not meet the ingredient requirements.

(5) Cakes, crackers, wafers and biscuits, excluding:

  • (a) cakes not covered, or decorated with chocolate,
  • (b) ice cream, frozen desserts, etc.,
  • (c) chocolates, sweets and similar confectionery.

Live animals, animal feeding stuffs

(1) Greyhound feed supplied in units of 10kg or more.

(2) Live poultry and live ostriches.

Pharmaceutical products

Non-oral contraceptives.

Certain safety equipment

Children’s car safety seats.

Newspapers and other printed matter*

Printed newspapers and magazines, brochures, leaflets and programmes, catalogues, directories, maps, charts, sheet music – provided the material in question does not consist mainly of advertising. Shows, exhibitions, cultural facilities, etc*

(1) Cinema admission charges.

(2) Promotion of, and admission to, live theatre and concert shows, other than dances, which are not exempt.

(3) Amusement services.

(4) Admission to artistic, cultural, historical or scientific exhibitions (that are not exempt).

Private dwellings

(1) Services incorporating the development of immovable goods consisting of private dwellings, i.e., building type work (subject to the two-thirds rule).

(2) Routine cleaning of private dwellings.

Agricultural goods and services (1)

Agricultural services.

(2) Animal insemination services.

(3) Livestock semen.

Hotels, holiday accommodation*

Accommodation in a hotel, guest house, holiday home or caravan park.

Sporting facilities*

(1) Commercial sports facilities.

(2) Golf facilities provided by a member-owned golf club, if the turnover exceeds €37,500 in any continuous 12-month period.

(3) Golf facilities provided by a non-profit body, if the turnover exceeds €37,500 in any continuous 12-month period.

Other services

(1) Waste disposal services.

(2) Minor repairs to movable goods.

(3) Hairdressing services.*

Housing

The supply of immovable goods used for residential purposes, i.e., houses and apartments.

Non-residential immovable goods

(1) The supply of immovable goods not used for residential purposes, i.e., commercial property.

(2) Services consisting of the development of commercial property, i.e., building type work (subject to the two-thirds rule).

(3) Routine cleaning of commercial property.

Concrete works

(1) Concrete ready to pour.

(2) Standard-sized concrete building blocks.

Energy products and supplies

(1) Coal, peat and solid fuel products.

(2) Electricity.

(3) Domestic or industrial gas for heating or lighting.

(4) Home heating oil.

Photographic and related supplies

(1) Photographic development services.

(2) Photographs and negatives supplied by a professional photographer.

(3) Professional photographic services.

(4) Passport photographs supplied by a photographic vending machine.

(5) Film editing services.

(6) Photographic agency service receipts.

Hiring for short periods

Short-term hire of road vehicles, boats, caravans, mobile homes, and tents.

Certain repairs and services

(1) Repair and maintenance of movable goods (but not motor accessories, batteries, tyres, tyre flaps or tyre tubes, supplied in the course of a vehicle service).

(2) Zero-rated repair work (on movable goods for export, on aircraft or sea-going vessels, or on equipment used in international aircraft) is excluded from (1).

Miscellaneous services

(1) Care of the human body (health studios).

(2) Professional jockey services.

(3) Professional veterinary services.

(4) Tour guide services.

(5) Driving instruction (other than heavy goods vehicles).

Plants and bulbs

(1) Nursery or garden centre produce.

(2) Goods used for the agricultural production of biofuel.

Works of art

  • Original works of art (paintings, sketches, engravings, sculptures).
  • Antiques
  • Antiques more than 100 years old.
  • Literary manuscripts
  • Literary manuscripts certified as being of major importance.

For more information on your particular industry please visit www.revenue.ie/search-vat-rates

You should also seek advice from your accountant

Source www.taxworld.ie

Civil service mileage rates

Income tax rates and bands

Universal social charge

PRSI

Pay-related social insurance (PRSI) is levied at the following rates, for the tax year 2017.

Employee

Exempt: Earning up to €352 per week.

4%: Earnings above €352 per week.

Employer PRSI

8.5%: Earnings up to €376 per week.

10.75%: Earnings above €376 per week.

Self-employed PRSI

4%: All earnings. The minimum contribution is €500 per year.

 

From January 2016, earnings between €352 and €424 per week are subject to a maximum PRSI credit of €12. This is reduced by 1/6th of earnings in excess of €352.

Corporation tax rates

Standard Rate

The standard rate of corporation tax is 12.5% .

Start-up companies

A start-up trading company can get a three-year exemption which reduces its corporation tax charge (up to €40,000 per annum) to nil.

There is marginal relief if the charge is between €40,000 and €60,000. In theory, this means a start-up company can earn annual net profits of €320,000 (€40,000 divided by 12.5%) and pay no tax.

However, the relief is linked to the amount of the employer’s PRSI paid by the claimant company, subject to a maximum of €5,000 per employee, and an overall limit of €40,000. The relief does not apply to trades carried on by associated companies.

Warning: you need to have employees in order to claim this relief.

 

Knowledge Development Box (KDB)

The KDB rate of corporation tax on profits from patented inventions and copyrighted software (qualifying assets) is 6.25%.

Higher rates

The following types of income are taxed 25%:

  • untaxed interest and income from foreign property
  • miscellaneous income not taxed under any other heading
  • rental income
  • income from mining activities, petroleum activities, and dealing in land