Frequently Asked Questions – Sole Trade

Over the last number of months we have received numerous questions by email and blog comment. Below are a selection of the most popular questions relating to setting up a business as a sole trader.

Can I register as a sole trade and continue to work in my current job?

Yes. You can register as a sole trade using Form TR1 and continue to work in your current employment. Once registered as a sole trader you are required to submit a tax return by the end of October each year which will include all your income, from both your normal employment and your sole trade business.

Do I need to register for VAT? / Do I need to charge VAT on my products or services?

Generally a business whose turnover in any 12 month period exceeds €75,000 for the supply of goods and €37,500 for the supply of services are required to register for VAT. Once registered for VAT you are required to apply the relative rate to the cost price and submit VAT 3 returns to the Revenue Commissions, usually on a bi monthly basis.

I intend to set up a new business, when should I register as a sole trader?

You are required to register with the Revenue Commissioners, as a sole trader, once you commence to trade in your new business.  You will use Form TR1 to register as a sole trade which will also register you for Income Tax. At this time you can also register for VAT and as an employer, if you so wish.

Once registered you are then required to submit an Income Tax return to the Revenue Commissioners each year. For the tax year 2012 you will be required to submit your Income Tax return on or before the 31October 2013.

I have set up a new business and will have a large number of expenses in setting up – can these be claimed against taxes?

Any expenses incurred wholly and exclusively for the purpose of the business can be used in calculating the profit or loss the business makes in that tax year. Any expenses incurred prior to commencing to trade can be used in the first year of trading. It is important to note that some of these expenses might be of a capital nature (i.e. a new car, computer equipment, etc.), which cannot be used in calculating your profit, but an allowance of 12.5% each year can be claimed on your tax return.

Any profit that the business makes will then be taxable at the appropriate tax rate and any losses incurred can either be used against other income in the year or carried forward to offset against profit in the future periods.