More Frequently Asked Questions
Since my last Frequently Asked Questions post , I’ve kept a record of the types of questions I get asked regularly, either as comments or by email. Here are some of the more popular queries over the last 5 months.
Q. Can a sole trader register a company name? If so, are accounts required to be sent to the Companies Office?
A. There has been quite a lot of confusion about this. A sole trader and a company are two separate types of legal entity.
A Sole Trader is someone who sets up in business on his/her own and registers for taxes with the Revenue Commissioners as a sole trader. A Sole Trader should register a business name with the Companies Registration Office (CRO) if the individual intends to carry on business under a name other than his/her own true name i.e. John Barry trading as ABC Style. A sole trader will never be required to file accounts with the CRO.
A company is made up of at least two Directors, a company secretary and at least one shareholder. The name of the company will feature the word “Limited”. It is registered in the CRO and is required to submit Financial Statements and a Form B1 annually to the CRO.
The confusion arises as the Companies Registration Office also have responsibility for registering business names for sole traders.
Q. Can I, as a director, claim mileage and diesel expenses on a company car?
A. You have two main options:
1. You own the vehicle and pay for all the running costs out of your own pocket – diesel, motor tax, insurance, repairs. At the end of the month, you submit a mileage claim to the company for business mileage using the appropriate rates, e.g. 500 km @ €0.5907. (Note the rates are in kilometers although many people still call it “mileage”.)
2. The company owns the vehicle and pays for all the running costs – diesel, motor tax, insurance, repairs. The company can claim back VAT on these expenses as appropriate. In this case there is no mileage claim as the company pays for everything. Note that there may be a benefit in kind issue if the vehicle is used for personal use.
Q. My VAT registered company will be suppling services to a charity. They say they are not VAT exempt, so how much VAT do I invoice them and why would they not be VAT exempt?
A. Generally, you will need to invoice the charity the same as your other customers. The Revenue have brought out a leaflet on VAT on Charities which may be of interest.
Q. I set up a company a number of years ago and it never traded. I sent the Annual Return form B1 to the Companies Registration Office but I got a letter back saying I need to submit audited accounts. Is this necessary? I just want to get rid of the company.
A. Companies are required to submit an annual return (Form B1) and Financial Statements to the Companies Registration Office (CRO) each year, whether or not they have traded. Most small companies do not need audited accounts and can also submit a shortened set of Financial Statements (abridged). The first annual return is required 6 months after the company is registered and Financial Statements don’t need to be attached. Thereafter an annual return and abridged Financial Statements need to be filed with the CRO each year. The CRO write to each company and lets them know what the deadline date is for submission. This is known as the annual return date. You get 28 days after the annual return date to submit the annual return and Financial Statements.
If you miss this deadline date, then late filing penalties are imposed and the company loses its entitlement to audit exemption. The Financial Statements must then be audited for the current year and the following year. This can be a costly mistake for small companies.
Once the annual return date is missed, you cannot apply for voluntary strike off (i.e. removing the company from the register) until the missing annual return and abridged Financial Statements have been filed. You will therefore need to appoint an auditor to audit the Financial Statements even though there are no/few transactions.
Note that companies limited by guarantee without a share capital (e.g. charities, community groups etc) must always submit audited Financial Statements and cannot abridge them.