Registering as a Sole Trader
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Partner at Parfrey Murphy Chartered Accountants. BComm HDE FCA Tel: +353 (0)21 4310266, Email: SeamusP@parfreymurphy.ie |
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A sole trader is the simplest form of business in Ireland. As the name implies, it refers to one individual who owns and operates a business. A sole trader can have employees to assist with the running of the business, but it is the sole trader who owns the business, taking all the risks and rewards.
To register as a sole trader you will need to complete a Form TR1, sign it and send it to your local Revenue District Office.
Form TR1 allows you to register for different taxes:
- Income tax: Income Tax returns are due each 31 October (although there is usually an extension to mid November if you pay and file online).
- VAT: You will need to register for VAT if you have a VATable activity and if you are over the annual sales threshold – €37,500 (in the case of supply of services) and €75,000 (in the case of supply of goods).
- PAYE/PRSI: If your business will employ staff (other than yourself), complete part D.
- RCT: This is for Construction, Forestry and Meat Processing industry only
Some tips on completing the form:
- Leave Part A2 blank – this is for partnerships and trusts
- In the “Capacity” box, write “Individual”
- Q21: Put details of your rented business premises here. If you work from home, this is generally left blank.
- Q30: This is for Developer/Landlords only
- One of the most frequent questions I get asked is what date will the accounts be made up to (no.17 on the form). You can decide what date your accounts will be done up to every year. For example, if you started your business on 1 June 2010, then your first set of accounts could be to 31 May 2011. Or you could make your first “year” end 31 December 2010, so that every year your accounts are done from January to December.
- If you are trading under a name other than your own, you will need to register a business name.
When you are happy with the information in the form, sign and date the end of page 1. Remember to photocopy the form before you send it to your local Revenue District Office.
Over the next couple of weeks I will have further Start your own Business posts – Registering for VAT, Registering as a Company, What you need on your headed stationery etc. To get free notification of new posts, click on email updates or RSS updates in the sidebar.
NEXT STEP:
If you have any queries, please feel free to leave a comment or email me on blog@parfreymurphy.ie
Updated: 28/04/10
Hi,
I have just registered a business name with the CRO and as a sole trader, My business involves service and retail. Selling parts within Ireland and UK on my website and EBay and providing repair service locally (mostly non business clients). I wish to buy my parts from China,Korea and resell them here and use them as part of my local repair service. I have checked the taric and my parts are @ 0% duty, but are susceptible to VAT @ 23% on entry to Ireland. My question is: Should i register for VAT now or wait to/if i hit the 35k/75k barrier as I cant understand the benefits! and that i would then have to add VAT on my labor charges + lose work to private individuals as my charge would be too expensive. Site is very informative thank you, and would appreciate any advice or pointers
regards will
hi there,
I registered as a sole trader by submitting the TR1 form. I also registered for VAT as I was unsure what my income will be and if i would be providing services in Ireland or other countries.
I am contracting for a US/UK based company, providing telecoms consultancy. I am based here but clients are in the EU.
I know I don’t need to charge VAT but do I need to make a VAT return as I registered?
Thanks,
Garret
Hi Garret,
Thank you for your comment.
As you are registered for VAT you are required to file a VAT return on a bi monthly basis even if you are not charging VAT.
Kind regards,
David.
Hi, I’m an Italian professional currently employed in Dublin on a full time job, and I would like to register as a sole trader in order to startup a web agency.
I have a couple of questions/doubts about this, and I hope you can help me (thanks in advance):
1. Assuming that I’m currently earing 40.000 eur from my current job, this means that all of my incomes coming from the sole trader activity will be taxed at the higher rate? or those incomes are considered separately from my current earnings?
2. Selling websites + web related activities can be considered as selling good or (as I think) will be considered as selling services?
3. Due to the nature of the activity, I will have to sell our services to people from all over the EU/World. How it works for VAT? due to the fact that I’m not applying VAT I can sell to other countries without applying it?
4. It is slightly possible that some of the works could be assigned to external freelance, that will emit a bill to my web agency. The amount I’ll pay for this services can be considered as allowable expenses?
5. How much can cost x year mantain a sole trader activity? (accountant, registering it).
Thanks in advance,
Alex
Hi Guys,
Firstly – A very big thank you for all your open source information on the site. Fantastic service. I’ve been digging through Enterprise Ireland, Intertrade Ireland and the Irish revenue site and it seems to be all there but I’m in at the deep end and it’s all a bit overwhelming. Your site is fantastic!
· I have an opportunity to sell a product in the UK. The product currently comes to a currently standing VAT registered sole trader in Ireland from Germany.
· I will purchase the product “here” and sell it to a combination of VAT registered business consumers and also non VAT registered consumers in the UK. The actual breakdown of the VAT/non VAT registered customers is not clear just yet.
· My forecasted turnover may stretch to 20-30,000€ however this is not clear just yet
· I hope to operate as a sole trader on my own initially for at least the next 12-18 months from September when I hope to start I will not be in gainful employment elsewhere.
· It will be a mixture of product and service provided to the end user
· I will have and on-going contract based and other work in Ireland in addition to the UK operation.
I have a few queries/comments based around a summary of what I have found out so far as follows.
· Within the EU dispatches between VAT registered businesses are not subject to VAT and can be invoiced with the 0% VAT provided both valid TAX numbers are on the invoice? So if I sell to a business in UK this is okay. Does this also hold true when I exchange the product between my VAT registered sole trader business and the Irish VAT registered sole trader holder of the product? So the link from IRE to UK via me is not subject to VAT if all are registered.
· I understand that if my turnover is less than 37,500/75,000€ for service/product I’m not obliged to register for VAT but it does seem to make sense to do so anyway.
· If the customer is not registered and I’m registered here then the Irish rate of VAT applies appropriate for goods/service on the invoice to the customer
· I do not need to register for PAYE/PRSI if I do not employ anyone. However “PAYE and PRSI contributions do not need to be paid when proprietors or partners draw cash (although they do catch up later)”. Can you possibly elaborate on this?
· If I do have gainful employment elsewhere both relevant tax and income information must be declared as I can’t use my tax credits independently for both J
So once I have registered my business name, and filled out the TR1 form registering me for VAT as a sole trader – I’m good to go?
Any help would be greatly appreciated, Thanking you in advance
Hi
I’m planning to set an online shop in Ireland. I’m in the process of registering my business name and registering for tax. However I don’t know how long I will be staying in Ireland and plan to move to the UK. So how do I move an online business? I will also be on the Back to work allowance and know if I move I will no longer be entitled to this scheme.
Thanks
Summer
Hi Summer,
Thank you for your comment.
In general terms, the extent of an individual’s liability to Irish income tax depends on whether the person is resident in Ireland. As a sole trader when you leave Ireland you can deregister for income tax purposes in Ireland and seek assistance from a taxation advisor in the UK about becoming registered for tax purposes in the UK.
Kind regards,
David
Hi
Im currently working a full time job but am going to set up as a sole trader for extra income.I am going to sell goods online through my own website.
I know already I wont be required to register for VAT as i dont expect to make over £75,000 in my first year.After reading through your helpful advice on this site, i understand that i should register as a sole trader and I should submit the TR1 form to the Revenue office at the end of the tax year.I also understand that my employer will have continued to deduct income tax on my PAYE income.
As an example,lets say i earn £30,000 from my day job and i earn £30,000 from my online sales.As im not registered for vat and my employer pays my employee tax, what tax and how much will i owe after i submit the TR1 form from the example i have given.
Any advice is much appreciated.
Kind Regards,
Aidan
Hi Aidan,
Thank you for your comment above.
As you are aware you only need to register for VAT if your turnover, in any twelve month period, exceeds or is likely to exceed €75,000 for goods or €37,500 for services. Therefore, as a sole trader your will only be liable for Income Tax, Universal Social Charge and Pay Related Social Insurance (PRSI) on any profits the business makes during the year. You will be required to submit your Income Tax return by 31 October each year.
Without a detailed knowledge of your particular personal circumstances, it would be hard to estimate the level of taxes you will pay. Assuming you are a single person, any income in excess of €32,800 will be taxed at the higher rate of 41%. Therefore the majority of your profit (income less allowable expenses) will be taxed at higher rate of 52%. (Income Tax, USC and PRSI)
I hope the above is of some assistance to you. Please get in contact with us, if you require any further information.
Kind regards,
David.
Hello.
I’m already registered as sole trader, I did it 2 months ago but I didnt start the activity yet and I was working full time for a company also. I have been dismissed and I would like to know if Im entitle to ask for any benefir from the social welfare. I’ve been working for more than 2 years in that company.
Thank you in advance for your time.
Hi Roberto,
I would suggest discussing your situation with your local department of social protection office. There are a number of conditions that must be satisfied before you are entitled to claim Job-seekers Benefit (read here) – the main one being that you must be available for work. Therefore if you are an active sole trader, you might not be meeting this requirement.
Kind regards,
David.
Hello
I would like to register as a sole trader, now I have few questions regarding the subject:
1)Is there any amounts thats tax free
2)If I dont have a bussiness address, can I use my residential address if I am renting as the bussiness address
3)Whats the limit of writing of the income against the tax, say if i want to buy a car towards the bussiness, can i write the cost of it off
4)On the form TR1 there is a question regarding an estimate income for 12 months of trading, if I will give bigger amount then my actual income is then will I be taxed on that
5)When you register as a sole trader is there any registration number that you receive
6)If I will register say mid year, and I am due for tax by the 31 of October, do I still have to pay for the full year
Hi Luka,
Thank you for your comment.
To register as a sole trade you need to file form TR1 with the Revenue Commissioners. Once you are registered you are then required to file an Income Tax return for each calendar year. The deadline for filing the Income Tax return is 31 October each year.
I will now answer each of your questions below:
1. All income is subject to tax at either 20% or 41% (plus Pay Related Social Insurance and Universal Social Charge). Assuming you are a single person, any income in excess of €32,800 will be charged at 41%. There is no tax free allowance/amount, but there is a tax credit that is deducted from any tax calculated on your income. The tax credit for a single person is €1,650.
2. Your business address can be your residential address, but bear in mind that your business activity should be conducted from that address.
3. Expenses that are wholly and exclusively for the purposes of the business can be deducted from your income when arriving at your taxable profit. But there are some exemptions to this – especially with regard to items of capital nature (e.g. Motor Vehicles, Office Equipment etc…) Therefore if you purchase a Motor Vehicle for use in the business only 12.5% (Capital allowance) of the cost, which is dependent on the CO2 emissions of the car, can be claimed each year.
4. The estimated income referred to on Form TR1 is only an estimate. You will be taxed on what you actually receive during the year and not this estimate.
5. Your sole trade registration number is your current PPS number.
6. If you register in say mid 2013 – you will be required to file an income tax return for the tax year 2013 on or before 31 October 2014. This tax return will outline all your income form 1 January 2013 to 31 December 2013.
I hope the above is of assistance to you. If you require any further assistance please get in contact with us.
Kind regards,
David.
Hi,
Im currently working a full time job but am going to set up as a sole trader for extra income. I know already I wont be required to register for VAT but I am a bit unclear about how the income tax/prsi/paye systems work because now I will have 2 sources of income. Any help you can give in this matter would be great. Thank you in advance for your time.
Hi Gerard,
Thank you for your comment.
Now that you are a sole trader you are required to submit an income tax return by 31 October each year. Therefore, for the tax year 2013 you will be required to submit your tax return by 31 October 2014. When submitting your tax return you will report all your income from your full time job and any profit/loss that you make on your sole trade business and your taxes will be calculated based on this information.
As your employer will have continued to deduct income tax on your PAYE income – this will be deducted from your total tax due on your tax return and you will only be required to pay any additional tax that is due.
Best of luck in your new business venture and if you require any assistance please get in contact with us.
Kind regards,
David
Hi,
i am setting up e commerce business as sole trade.
Goods buying from EU wholesaler which are with VAT, as im not planning to go over 35000 i am not required to registered for VAT.
Do i have to pay any payments to Revenue?( i registered as sole trade with revenue)
Do i have to open my business account or can use current acc if im doing business true Paypal?
Kind Regards
Hi Laine,
If you do not register for VAT you will not be required to make any VAT payments to the Revenue Commissioners. The only payment that you may need to make will be that of Income Tax. It would be recommended to open a business accounts, so that you can easy keep track of your business expenses.
Kind regards,
David.
Hi there
Wondering if you could tell me how many years account does one need to keep. Is it 7 years (ie 2005 would be the oldest accounts files one needs to keep)
Many thanks in advance
David
Hi David,
Both the Revenue Commissioners and Company Law require that Books and Records should be kept for 6 year.
Kind regards,
David.
Thanks David.
Appreciate your help
D
hi,
i am in the process of setting up an online store to sell clothing that i make myself. because i am starting small i will be using paypal to accept credit card payments and my question is, are paypal receipts sufficient to use for my tax returns. Usually if you sell an item via paypal you get an emailed receipt but will this be enough?
i do not expect to have a large turnover in the first year so i do not plan to register for vat.
thanks in advance,
maggie
Hi Maggie,
Thank you for your comment.
Yes, the receipt that is emailed to you would suffice as evidence of the sale. I believe you should also be able to get a statement from paypal that you could retain on file. We would have a number of clients who would use paypal on a regular basis for selling some of their products.
Kind regards,
David.
Hi there,
I was hoping you could clarify a situation for me, I am currently trading as a sole trader. My income is only coming from one source, both a service chage weekly and a commission monthly, is this allowable for both me and the company?
Also, if I wished to look to change accountants from who I currently deal with, how do I do this?… My first tax return is due Oct ’13.
Thanks in advance!
Hi Lisa Marie,
I have replied directly to your query.
Kind regards,
David.
Hello,
have a question:
Do I need to register for VAT if I want to franchise and resell goods from EU?
Because you need to register VAT if you want to resell goods from EU, am i right?
Any chance to avoid registering VAT if I want to resell good from EU?
Thank you
Hi Robert,
Thank you for your comment.
To be able to answer your question we would need to know what your estimated turnover will be for a 12 month period and whom your will be selling the supplying the goods to – non registered or registered individuals?
kind regards,
David.
Hello David,
thanks for reply.
My 12 month turnover would be less than 75000 (around 34000)
and there is difference whom to sell? Initially was thinking selling to schools (I suppose they are VAT registered) but can sell to not registered individuals.
regards
Robert
Hi,
My spouse is a green card holder so I am here on a stamp 3.
I wish to apply for spousal work permit for which I am supposed to have a job contract.
Now the company in context has queried me if I have PPS number and if I am allowed to register as a sole trader and for VAT. I do not think for taking a contractual job I have to register myself as a sole trader and for VAT.
Could you share your views on this please.
Thanks,
Anu
Hi Anu,
Thank you for your comment.
I would not be familiar with regard to visa conditions of yourself and your spouse. I would suggest that you discuss the situation with the relevant department or an immigration specialist.
Normally if a person is not employed my the company but is performing work for a company they would need to register as a sole trader. This can be done using Form TR1. You can also register for VAT at this time if you anticipate that your turnover for any 12 month period will be in excess of €35,000 for Services and €75,000 for goods.
Kind regards,
David.
Hi,
I’m providing a software company services: hiring, team management, and development direction. As a sole trader can I claim Research and Development allowances for the computing equipment I need to buy to support this role? Would I be better to incorporate and invoice from a company where I can put the cost down as capital expense?
I was advised as this is going to be a short term role where I will earn less that £55k that it is best to go down the sole trader route.
Cheers
Mike
Hi Mike,
Thank you for your comment.
The research and development (R&D) credit is only available to companies who seek to achieve a technological advancement so simply purchasing computing equipment would not qualify a company for the R&D tax credit.
If the role is short term it may be best to operate as a sole trader, as setting up, running and subsequently dissolving a company can be quite expensive in comparison to a sole trader.
kind regards,
David.
Hello Orla,
I live and work in full time employment Northern Ireland. Is it possible for me to set up as a sole trader in the Republic of Ireland while still being an employee in the North? If so is there anything peculiar that I should be aware of? I pay tax in the north. I have an address that I can operate from in ROI.
Many Thanks
Robert
Hi Robert,
Thank you for your comment. You would normally only register as a sole trade in the Republic of Ireland if you are resident here.
Kind regards,
David.
Hi,
My question is regarding the VAT registration. I would like to set up a sole trade company to sell goods online, I do not think my revenues will exceed €75,000 within the first 12 months. I don’t know which option is more interesting for me?
- If VAT reg. can I claim VAT back on everything I buy for the company, such as material/stationary needed to start the company + goods I will buy to resell?
- If VAT reg. Can I only claim VAT back if bought from companies in Ireland or from anywhere?
- If VAT reg. will my product be more expensive for clients because I will have to charge VAT on it?
- If non VAT reg. I don’t charge VAT to my clients, right?
Thanks a mil for your help,
Regards,
Hi,
Thank you for your comment.
If you register for VAT you will have to charge VAT on your sales to clients/customers and in turn you can claim back Irish VAT on any purchases which are for the purpose of your business. This will include items such as, goods for resale, stationary, light, telephone, professional fees etc. If you purchase goods form a country within the EU the purchase maybe zero rated for VAT purposes, once you supply them with your Irish VAT number. Any goods purchased from outside the EU will have VAT applied by customs on import. The VAT paid on these goods can be reclaimed in your VAT return as if it were a normal purchase.
If you do not register for VAT you will not be obliged to charge VAT on your sales to clients/customers.
I hope the above will be of assistance to you. If you require any further information in setting up your business please feel free to contact us.
Kind regards,
David.
Hi, I am registered as self employed photographer in other EU Country, but i come to Ireland and do some Photography work here as well. Do i have to register in Ireland as well? Or is it enough to have contract signed between me and client, and then pay tax in country i am already registered as self employed?
Thank you!
Hi Kitija,
Thank you for your comment.
The extent of an individual’s liability to Irish income tax depends on:
• Whether he/she is resident in Ireland
• Whether he/she is ordinarily resident in Ireland
• Whether he/she is domiciled in Ireland
An individual is regarded as resident in Ireland for a particular tax year if he/she is present in the State:
• at any one time or several times in the year for a period in the whole amounting to 183 days or more, or
• at any one time or several times in the year and the preceding year for a period in the whole amounting to 280 days or more.
However he/she is not regarded as resident for any tax year in which he/she spends a period in the whole amounting to 30 days or less in the State.
An individual is considered ordinarily resident in Ireland for a year of assessment if he has been resident for each of the three years of assessment preceding that year.
In general terms, a person is domiciled in the country of which he/she is a national and in which he/she spends the majority of his/her life.
In summary unless you spend the necessary number of days in Ireland in any given tax year you will not become Irish tax resident and should not be obliged to register for Irish income tax. We would need detailed information on your personal circumstances before giving any specific advice on your obligation to register for tax purposes.
Kind regards,
David.
Hi, great website! Could you help me with my query, together with my friend, we want to set up an online based business as a partnership. The problem is, that my business partner lives and works in another EU country but we would like to trade together as a one firm. I am based in Ireland, working full-time. Is it even possible to register a partnership in Ireland if one of the business partners doesn’t live in Ireland? I will be grateful for your advice, thank you.
Hi Louisa,
Thank you for your comment.
According to the partnership tax returns it appears that non resident partners can exist in a partnership which has been registered in Ireland.
Best of luck in your new business.
kind regards,
David.
Hi David
Can I have several sole trading business names at the same time? And file a single combined tax return for both businesses each tax year?
Or do I need to file tax returns on each business name separately? Is there any way to group for tax filing purposes? My purpose in combining the two is to simplify the administration for myself – I will be working from one premises, one phoneline, one set of bills – with two websites, each offering design/project management service but targeting different client markets.
Or could I resister a business as a single word name, for example “Savannah”, pay tax under the name “Savannah”? But promote the business online via the name “Savannah Designs” on one website and also “Savannah Books” on another website?
I am in full time PAYE employment in design.
I am registered as a sole trader in design/training under a business name and file tax returns annually on this independent business.
Any help would be very much appreociated!
Deirdre
Hi Deirdre,
Thank you for your comment. I have contacted you directly relating to situation.
kind regards,
David.
Hi, I am an Irish consultant working in France for 6 months, I may not be resident in Ireland for a full 6 months am I liable for taxes there? Also, with regard to the double tax treaty, how does this work? Do I need to register for tax in France also? Thanks.
Hi Sinead,
Depending on your Irish tax residency status prior to working in France for six months you may be liable to Irish taxes on your French sole trade profits (assuming you are a sole trader). You may also be taxed on these profits in France but the double tax treaty enables an individual to claim a tax credit in his/her country of residence (Ireland) in respect of the tax paid in France to avoid the same profits being taxed twice.
To give a more precise answer we would need more specific information on your personal circumstances and place of residence prior to working in France.
Feel free to contact us should you wish to discuss the above.
Kind regards,
David.
I have a strange situation that accountants (explained it to three of them) seem not to be able to help me with. One of them told me straight out that they have no idea
I am a non resident of Ireland, but am a citizen
I am not domiciled in Ireland
My contract is with a company registered in Ireland
I am a contractor to this company, not a PRSI worker
Within the contract it states my address and place of work as not being Ireland (another country)
I do not have to be registered as a sole trader in the other country I am based in. The rule there means I declare all income (capital gains, rental etc) and pay on the lump sum.
That country does not have a double tax agreement with Ireland
Last year I had to come back to Ireland on a few business trips. The company covered me with a per diem. It was not strictly part of my job or responsibilities as in my contract, but for certain reasons, I needed to be in Ireland
In total I spent a number of periods in Ireland in 2012. A total 131 days (including weekends and a couple of weeks holiday I took)
I am not a saint, but also I do not want to be a tax dodger/evader, so I’ ll pay if I owe. Conversely though I do not want to walk into the revenue commissioners completely blind of what my situation and liability is, and be forced to pay based only on their assessment
I tried to find the relevant forms to try and understand what I should be liable for, but the forms do not seem to cover my siutation
Any help would be appreciated
Conor
Hi Conor,
We have emailed you directly regarding your query.
Kind regards,
David.
Hi David,
I am Portuguese citizen currently working in a full-time work. I would like to setup a small business sole trader in Dublin (online ebay selling). I was reading and saw that I should submit the TR1 form to the Revenue office. I was wondering if I could operate that from home without problems and can run that while working as employee.
Thanks a million
Bruno
Hi Bruno,
You will need to submit a Form TR1 to register for income tax purposes in respect of your sole trade. Your sole trade business can be run as a side line while you work full time as an employee.
Once registered for income tax purposes with Revenue you will be obliged to file annual income tax returns with Revenue. This returns are due each October.
Kind regards,
David
Hi,
I have a question in relation to a sole trader business. My wife, a hairstylist with 7 years exp, has decided to open her own business and having done a good bit of research and a read through your blog/comments amongst others, we reckon we are heading in the right direction as to what is step-by-step of business set-up (as in register with CRO, open business bank account, register for tax (have to look into this more this is registering with the Revenue & TR1 form which i presume can be done online) but what i would like to ask is what is the benefits or indeed is it necessary to become VAT registered for this type of business (Hair Salon)
Many thanks in advance and would appreciate any help.
Kieran
Hi Kieran,
Thank you for your comment – it’s always great to hear of entrepreneurs interested in setting up their own business!
In relation to your query regarding registering for VAT, your wife will need to estimate how much she expects to earn for the 12 month period from start up. For services, where turnover exceeds €37,500 in any 12 month period a business is obliged to register for VAT. If your wife does not expect sales of this level she instead has an option as to whether or not she wants to elect to register. It may be difficult to estimate the first year’s turnover until the business is established so if she decides not to register, she should monitor the sales carefully to ensure sales do not exceed the threshold.
The benefits of registering for VAT are generally favourable to start-up businesses with large initial spend while the business establishes itself, e.g. large costs on set-up, advertising, marketing, etc., as VAT can be reclaimed on purchase input costs when the business may not be making large sales. The VAT refunds earned can be valuable from a cashflow point of view.
Without more details on your wife’s expectations, we cannot advise further. Please feel free to contact us at any time should you wish to discuss the above.
Kind Regards,
David
Hi There,
I am working as an occupational Therapist and i am going to start my private practice in and around my area. my question is:
1. Do I need to register for Tax TR1 even though I am currently in Payroll?
2. Will my service be vat registered because my existing salary is over 37500 mark?
3. I got my insurance and registration for private practise and all other office expenses and I don’t know how many will be using the service and how much of my money out (expenses) will be refunded back to me by revenue?
I really appreciate if you answer all the above questions
Thanks
Ahamed
Hi Ahamed,
Thank you for your comment.
When you start up a new business you are required to register as a sole trader using form TR1. You can continue to be employed in your current job and be paid through payroll.
Your obligation to register for VAT will be based on the turnover or sales of your business. Therefore, if your turnover, in any twelve month period, does not exceed or is not likely to exceed €37,500 (in the case of supply of services) you are not obliged to register for VAT. Once this threshold is exceeded, you are required to charge VAT on you services and pay that over to the Revenue Commissioners.
Any expenses that you incur for the purposes of the business are tax deductible and can be used in calculating the profit or loss the business make.
Should you require any assistance in your new venture please do get in touch with us.
Kind regards,
David.
Hi, I am considering taking a voluntary redundancy package from my current employment and starting up my own business. I’d like to know how ” the seed capital scheme” works. say i were to invest part or all of my redundancy(say 50k), how much income tax could i claim back or is there a better scheme available for this sort of move?
Hi Barry,
Thank you for your comment.
I would suggest getting in touch with Enterprise Ireland (please see link here) to discuss your proposed business venture. There are number of conditions that would need to be met before you would be eligible for the scheme such as the type of activities of the company.
If you require any further assistance please get in touch with us at 021 4310266.
Kind regards,
David.
Hi,
Just want to know what happens after the TR1 form is filled out and sent to Revenue District Office.
Can i go online and complete my tax affairs.
I currently rent a house and make a very small income in Photography.
I Also have a full time job.
Many thanks,
Owen.
Hi Owen,
Once you have submitted Form TR1 to the Revenue Commissioners, it usually takes up to 10 working days to be processed. You could call them to check that they received the documentations and that you now registered as a sole trader. Once you are registered I would suggest registering with ROS (Revenue Online System) and then you will be able to file all relevant tax returns on line.
If you require any assistance in preparing your sole trade accounts or indeed filing your tax returns, please get in contact with us on 021 4310266.
Kind regards,
David.
Can I start up a sole trade business and work as employee in another company at the same time..? I’m planning to open my own sole trader business but I wouldn’t be able to leave my job as I need it to sponsor my new sole trader business at the start.I’m expecting that Income of my new business would be very small at the start.
Also in case I would loose my current job and sole trader business wouldn’t work out would I still have a right to apply for social welfare..?
Example:
I have a freind who was a sole trader and his business bankrupt and he wasn’t allowed to apply for social welfare for 2 years since he closed his business.
Very much appreciate your help..
Many Thanks,
Tatiana.
Hi Trtiana,
Thank you for your comment.
There is no problem in setting up a business while you continue to work in full time employment. You would be required to register as a sole trader, using Form TR1, and submit tax returns under self assessment to the Revenue Commissioners by October each year.
You would need to contact the Department of Social Protection with regard to wheather you would be entitled to claim job-seekers benefit should you lose your full time job. The fact that you are working in your own business might be seen as a restriction, but you might be entitled to other benefits such as the Back to Work Enterprise Allowance.
Kind regards,
David.
What information should an invoice by a sole trader (who is not registered for VAT) include? Would the following be acceptable:
Name, Address, Telephone number/email address
PPS number
the customer’s name and address,
description of the service and the cost of that service.
Payment details / terms
Hi Sean,
Thank you for your comment.
The following are the minimum items that should appear on your invoice – trading name and address, invoice number, name and address of customer, description of service provided and cost of the service.
Kind regards,
David
Hi,
I have a question in relation to a sole trader business type. My girlfriend wants to set up a small company providing services as a freelancer photo retouching. She also wants to purchase a new computer. My question is: Can she get any reimbursement or an exemption from a tax? Many companies treat all computer equipment as a cost and thanks to it they may reduce its tax liability. Is the same policy relates to sole trader? We both have been living permanently in Ireland.
Kind regards,
Radek
Hi Radek,
Thank you for your comment.
If your girlfriend purchases a computer for use in the business then she can claim back the VAT on the purchase of the computer, if she is registered for VAT. A new computer should really be regarded as capital expenditure and therefore she would be entitled to a capital allowance deduction of 12.5% each year against the profits she makes in the business.
Kind regards,
David.
Hi David
If I register as a sole trader delivering consultancy services to a UK company (I will be invoicing the UK company for services I will be delivering in Ireland) I understand I do not have to charge VAT?
Is this correct?
Jason
Hi Jason,
You don’t charge VAT if you are not VAT registered or if you are VAT registered and the UK company is VAT registered and provides you with their VAT number.
Kind regards,
Fiona
Hi,
I am in the process of setting up as a sole trader I plan to sell crafts (I doubt their is huge profit to be made especially in the first year I understand that I can work as well as being a sole trader once I register with the Revenue. My question would be I plan to work at my business from my home (which is a council house I am renting from my local council as a tenant) My question before I register as a sole trader and the Revenue can I run a home based business in a council house or do I need to get permission from the local authorities before I go ahead and set everything up?
Any advice would be greatfully appreciated
Caroline x
Hi Caroline,
I would suggest that you contact your local authority to ensure that there is no restriction in using your council house as a place of business. Once you have established that you can operate your business from home, you need to submit form TR1 to the Revenue Commissioners to register as a sole trader. Than each October you will be required to submit your income tax return for the preceding tax year.
Kind regards,
David.
Hi,
I have recently registered a business name. I wish to run it just as a part-time business. I have a separate full time job and a part-time job. Tax office suggested me to submit Form-11 and since last 3 years I have been submitting Form-11. In the above posts, it is mentioned that if anybody wants to start a business as a sole trader, he/she must register with the tax office by submitting TR1 form. In my case, since I already submit my Tax Returns through Form-11, do I still need to register for tax using TR1 form?
Thanks in advance,
Jer
Hi Jer,
Thank you for your comment.
Normally when you start trading you would register with the Revenue Commissioners by filing form TR1. Then each October you would file your tax return which is also referred to as Form 11. From the information your supplied, it would suggest that, you are already registered as a sole trade and do not need to file Form TR1.
Kind regards,
David
Hello,
My soon wife to be is an Irish Sign Language interpreter and has worked through agencies for a number of years. I currently pay the higher rate of tax and someone has told me that if she was to setup as a sole trader it would benefit me also. I cannot seem to get a straight answer on this. Can you help?
kind regards,
Joseph
Hi Joseph,
We would require more information to determine if there would be any benefit to your partner becoming a sole trader. Initially the only benefit that there would be is that any expenses incurred that related to the trade of your partner could be deducted in arriving at her taxable income. It is unlikely that you will benefit from this set-up but please contact us on 021-4310266 or pm@parfreymurphy.ie and we can discuss the best and most tax-efficient options for all parties.
Kind regards,
David
I’m registered as a sole trader in Ireland, working from here, but I provide a variety of services: marketing services to individuals based in the UK (I invoice another sole trader out there who outsources work to me, for example), I’m working a few hours a week as a freelance editor for a company again UK-based (which I invoice them for each month based on an hourly rate) and i’m often hired for short-term jobs at trade shows, as a freelancer who is paid a fixed once-off salary from the UK.
If I hit the VAT treshold, will I suddenly have to start adding it to all these invoices, therefore upping the prices they are used to and making me non-competitive and at risk of losing business? What happens in cases where I’m offered x amount for a short term contract, take it or leave it, I can’t suddenly add 21%… Would that not be an incentive to keep under the threshold and in a way limit the potential of a business because adding VAT could scare off my regular customers?
Sorry if this seems silly but I’m really in the dark about VAT, especially when invoicing abroad.
Hi Helena,
Thank you for your comment.
In general a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €37,500 (in the case of supply of services) is not obliged to register for VAT. Once this threshold is exceeded, you are required to charge VAT on you services and pay that over to the Revenue Commissioners. At this point it would be at your discretion as to whether you charge VAT of 23% on your current prices or eat into your margin and take the hit of 23%.
With regard to your situation, where you provide services to the UK, once these customers are a registered business and you have verified their VAT number, you can zero rate the service and not charge VAT. This also applies to any other business customer who is located in the European Union. If the customer is a private individual not registered for VAT, then VAT at the standard rate would apply.
If you require any further assistance please do not hesitate to contact us.
Regards,
David.
Hi Orla,
my name is Juergen and I am german. I live here since 3 month and I want to open a coffeeshop with homemade cakes.
Also I want to make a service and repairs around the house.
Must I register both business separately or can I register it in once?
With kind regards,
Juergen
Hi Juergen,
Thank you for your comment.
Once you set up your business you will need to register with the Revenue Commissioners as a sole trader. This will only need to be done once regardless of the number of trades that you carry on. You will then need to report the profit or losses of each trade separately each October when filing your Income Tax return.
There are a number of articles available to review on our blog regarding setting up a new business which you may find useful.
Best of luck with your endeavors!
Kind regards,
David.
Hi, I am starting a sole trader business to act as a consultant. I was wondering if you could advise me on the process of doing so? I know I have to fill in the TR1 form but is this before or after I register a business name with the CRO? Also, do you know if I would be able to avail of any state benefits such as social welfare should I be unable to find work as a consultant? Many thanks in advance for your advice.
Hi Julie,
Once you set up a business in Ireland you are required to register with the Revenue Commissioners for Income Tax using form TR1. You can also register for VAT and as an employer at this time if relevant. It would be advisable to register the business name at the same time as completing the Form TR1, otherwise once registered with the Revenue Commissioners you would have to notify them that your are trading under a business name.
With regard to benefits that are available to you I would suggest contacting your local social welfare office and discussing what options are available to you as they have a number of schemes to help with setting up a new business. You could also get in contact with the local enterprise boards to see if there are any grants that you could avail of.
Kind regards,
David.
hi can i start up a sole trader business and work as eployee in another company at the same time
Hi Danny,
There is no problem in setting up a business while you continue to work in full time employment. You would be required to register as a sole trader and submit tax returns under self assessment to the Revenue Commissioners by October each year.
Should you require any further information or assistance in setting up your business please do not hesitate to contact us.
Kind regards,
David.
Hi
I am sorry for my english and probably silly questions. I would really appriciate if you can help me with these questions.
I am unemployed person, thinking of opening retail shop. I know there is some help from social welfare called Back to Work Enterprise Allowance which as i checked i would qualified. Do i need to be in a legal structure as a sole trade or can i go into partnership with a (employed) friend and still be able for the allowance? Or is the BTWEA avaiable only for sole trades?
For how long could we be not register for VAT as a new business??
Regards
Caroline
Hi Caroline,
As far as I am aware, the Back to Work Enterprise Allowance is to assist those people currently receiving social welfare payments who wish to be become self employed. I would think that it is unlikely that you would qualify for the allowance working in partnership with your friend but I would suggest getting in contact with your local social welfare office and discussing your options with them. Please be aware also that in order to be granted the allowance, you must not have commenced trading until written approval is received from your local Integrated Development Community.
In general, a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €75,000 (in the case of supply of goods) or €37,500 (in the case of supply of services) is not obliged to register for VAT, but you can elect to do so if you wish. This would be dependent on how much you expect to earn in your retail store.
Once you have more information on whether you qualify for the allowance, please feel free to contact us again and we can help you with the setting up of your business.
Best of luck with your venture!
Kind regards,
David
Greetings,
I really do respect your new blogs on Starting / Registering a Sole Trader
Business in Ireland | Parfrey Murphy Accountants Cork and of course will be back again!
Cheers..
Hey Orla,
My boyfriend recently setted up his own small boutique fashion shop. As he only started, I do go to the shop and give him a hand when I have days off work, but I dont get paid from him. So I’m just wondering does he need to register me as a staff or its ok for me to be in the shop and help out?
Regards
Gina
Hi Gina,
Thank you for your comment.
I don’t see any reason that you would need to be registered as an employee with the Revenue Commissioners if you are not getting paid for the work you are doing and it’s on a voluntary basis. But bear in mind that there may be other reasons you might need to be registered. e.g. insurance cover.
regards,
David
Hi Orla,
Im employed as a permatent teacher, and I want to set up a small web-based business, there is a fair chance that it will make very little (or none) money to be honest, but I’d like to give it a try. Are there any implications due to me being already employed? and does my curresnt PRSI contribution cover me? I have registered a business name, and am unsure what to do from here on, I was thinking of setting up as a sole trader! Any help would be great.
Thanks
David
Hi David,
Once you start trading you are required to register as a sole trader with the Revenue Commissioners. You do this by submitting form TR1. You will be liable for Income Tax, PRSI and the Universal Social Charge (USC) on your taxable income for the calendar year. The level of tax payable will be determined based on your total income earned during the year, not just your income from the trade.
The fact that you are currently a PAYE employee will not affect this.
The following option might also be available to you:
If your assessable non-PAYE income is less than €3,174 you are not required to register for self assessment and can continue to have the liability on such income assessed within PAYE by means of an adjustment to your Tax Credit Certificate. You would need to let the Revenue know how much additional income you will earn and they will adjust your tax credits accordingly.
However if your sole trade income is greater than €3,174 you will be required to register as a sole trader as outlined above.
Kind regards,
David
hi David
i am setting up as a sole trader, basically i will be providing a service for a company and billing them for my time, since i will not be charging them vat i will not need to register for vat. can i still register for vat and clam vat for fuel computer etc
Regards
Will
Hi Will,
In general a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €37,500 (in the case of supply of a service) is not obliged to register for VAT. Therefore if you opt not to register for VAT, due to not exceeding the threshold in any twelve month period, then you cannot claim for any VAT paid on business expenses. If you wish to claim the VAT on these expenses you would also have to charge VAT on your sales invoices.
IF you require any further information please get in contact with us.
Kind regards,
David
Hi David
My girlfriend opened a retail shop last year as a sole trader, registered the business name and is VAT registered as the turnover is greater than €75k.
She is now considering opening a second shop in a different town just for Christmas. The turnover will be less than €75k so she is considering the following options if these are possible
Trade under the same name and record VAT under the current registration
Or
Register a new Business name and not register for VAT. VAT will be paid on purchases and not on sales. As it’s a retail business the selling price will be the same as competitors who are VAT registered so this should increase profits by approx 10%. A lot of the goods will be imported from UK/France so does this affect the need for VAT registration?
If option 2 is possible do you need to complete two income tax returns due to trading under two business names and do you need to complete Form TR1 before opening the second shop?
Thanks in advance
Darren
Hi Darren,
Thank you for your comment.
You can carry out the two types of trades under the one sole trader VAT number. But as the two shops will virtually be carrying on the same trade you will need to combine the sales to see if you reach the threshold.
If the two shops were carrying on different trades, you could argue that the trades are not of the same nature and that you should not combine them. However, this may be difficult if you are trading as a “one man and his van” type business.
If you require any other assistance please don’t hesitate to contact us.
Kind regards,
David
Hello,
I wish to start a new business as a sole trader. I work in full time employment at the moment and I wish to stay in it. Is there a chance I could be sent some information in regard to this particular case? Basically I’m wondering how the situation is going to look like in terms of tax, PRSI, PAYE, etc.
Many thanks,
Lucas.
Hi Luc,
Thank you for your comment.
There is no problem in setting up a business while you continue to work in full time employment. You would be required to register as a sole trader and submit tax returns under self assessment to the Revenue Commissioners by October each year.
With regard to your tax situation – you would be taxed on any profits that the business makes during the year. If the business makes a loss you may be able to offset these losses against your normal PAYE income and reduce your tax liability.
Assuming that you are single and utilising your standard rate cut of (€32,800) and your tax credits (€3,300) fully you will pay tax at 41%, PRSI 4% and USC 7%.
Should you require any further information or assistance in setting up your business please do not hesitate to contact us.
Kind regards,
David
Dear sir/madam,
I registered a business last month thinking in work as a sole trader, but I have found a job in a company and I don’t believe my turnover as a sole trader will exceed the €5,000 euros, as I won’t work so much in my business. What should I do now? Do I have to pay Class S PRSI in this case? Should I deregister as a sole trader because the earnings may be less than 5,000?
Thanks and regards
I Alex,
Thanks for your comment.
An individual with assessable non-PAYE income of less than €3,174 is not required to register for self assessment and can continue to have the liability on such income assessed within PAYE by means of an adjustment to your Tax Credit Certificate. You would need to let the Revenue know how much additional income you will earn and they will adjust your tax credits accordingly.
There is no reason why you cannot be registered for self assessment and have a regular PAYE job at the same time. Therefore you will have to file an Income Tax return yourself by the 31 October each year. You will only pay class S PSRI on any sole trade part of your income/profits.
If you require any assistance please don’t hesitate to contact us.
kind regards,
David
Im thinking of setting up as a sole trader and wondering if my sales are €36500 and my draw downs are €24000 and my expenses are €10000 so I pay 20% on €36500 or on €10000.
Hi Grannia,
When filing your Income Tax return, with the revenue commissioners, your taxable profits are used to calculate your tax liability. Your taxable profits are your sales less allowable business expenses (e.g materials, postage, stationary, telephone, light and heat etc). Any monies you take/draw down from the business is not regarded as a business expense.
If you require any further assistance please don’t hesitate to contact me.
Kind regards,
David
Great Website !!
Just had a query.
I’ve a small jewelry company selling online (not turning over too much) I’m considering selling into shops but someone mentioned to me that if i were to sell to shops i would have to register for VAT? is this the case?
Hi Leanne,
In general a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €75,000 (in the case of supply of goods) is not obliged to register for VAT. But you do have the option to elect to register for VAT if you so wish.
I would suggest that you read our blog post on VAT registration.
Kind regards,
David
hey
im trying to become a sole trader in ireland
it is going to be small shop and as fas as i know i don’t need
to involve with VAT am i right??
and im holding stamp4 defacto visa which im allowed to
staying ireland as many as years i want to but do i need to
get a business permition from immigration??
in that way do i have to invest 300000 euro to get business permition?
i’v been try to find out this for months no one seems to know
Hi Hanna,
Thank you for your comment.
To become a sole trader you are required to register for Income Taxes with the Revenue Commissioners on Form TR1.
With regard to VAT, a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €75,000 (in the case of supply of goods) is not obliged to register for VAT.
Finally, I would suggest contacting the department of Department of Justice and Equality to find out what the conditions of your visa are.
Kind regards,
David
hi im in the process of starting a new business i have registered the name already the thing is most companies i want to deal with wont deal with me unless i am reg for vat can i register for vat while still reciveing social welfare ? and if the business fails is there much problems with deregistering for vat ?
Hi Lee,
Thank you for your comment.
Once you start a business in Ireland you are required to register as a sole trader for income tax purposes. In general a business whose turnover, in any twelve month period, does not exceed or is not likely to exceed €75,000 (in the case of supply of goods) €37,500 (in the case of supply of services) is not obliged to register for VAT, but you can elect to do so if you which.
If you elect to register for VAT and the business subsequently fails, once all returns are filed and up to date, there is a simple process to deregister for VAT.
As regards registering for VAT while in receipt of a social welfare payment – this would be a question for the Department of Social Protection or your local Social Welfare Office.
Kind regards,
David
Just registered my business, i am soletrader do i have an tax exemptions in my first year.. very worried about the tax .. for soletraders its very high… i am very worried cause i think i should just change to a LTD.
Hi Godfrey,
Thank you for your comment.
The tax that you will pay as a sole trader will depend on the profit that you will make for the year (income less any relevant expenses). Any losses that are incurred can be carried forward and off set against any future profits that the business makes.
I would suggest reading our blog post on Sole Trader v Limited Company. to assess which option would be best for you.
If you have any other questions please get in contact with us.
Kind regards,
David.
Hi there,
What a great website –
I’ve read through the questions and responses & most of my queries have been answered – apart from one small one:
- I am a PAYE worker in the higher tax band, using all my tax credits
I am considering starting a business, as a sole trader, while continuing in PAYE employement.
Assuming i do not choose to move credits around can I keep the tax affairs entirely seperate? I don’t want my colleagues in work to be made aware of my venture – will any sole trader earnings be highlighted in P60 etc?
Thanks in advance
C
Hi Catherine,
Thanks for your comment.
Your sole trade income will not be shown on your P60. You receive a P60 from your employer with the details of the salary they have paid you during the tax year.
Once registered as a sole trader you will be required to submit an income tax return to the Revenue Commissioners before the 31 October each year. You will detail all income on this return (PAYE and sole trade). Nobody, but you or your accountant and the Revenue Commissioners will be privy to this information.
I hope this answers your question.
If you require any assistance in your new venture please don’t hesitate to contact us.
Kind regards,
David.
hi,
Im not too sure who to address this to.
Im looking for some information.
I start trading in january of this year and have regstered this business name kirwans Computers.
I have recently signed a deal with a company and they have agreed to send work to my home.
I have an office setup with all the neccasaary equipment and am basically looking tosee what steps i need to implement to have a successfull and effecient company.
Firstly there is going to be probably 40-60 hours per week from this new business and i was thinking of taking some one on part time where i pay them for hours worked this will generally be 10-20 hours per week.
Do i need to register for paye prsi and what other things do i need to register for,
Do i have to pay a lump sum or can i just pay thier prsi and paye as they go. What rate of paye and prsi do i as an employer pay.
I have not registered for vat as i do not see my profits been more than 37000 this year. and i also have not filled in my tr1 i think its called.
i am new to all this so any help or guidance will be much appreciated.
Hi,
Thank you for your comment.
Once you have started trading it is advisable to register as a sole trader. During the registration process it will ask you about other taxes (i.e PAYE/PRSI and VAT) which you can elect to register for.
If your turnover exceeds or is likely to exceed €37,500 (in the case of services) you are required to register for VAT. If you do not think you will exceed this threshold you will not need to register or charge VAT unless you elect to do so. Why not have a look at our blog post on VAT registration?
Once you employ someone you are required to register for PAYE/PRSI. You will be responsible for deducting the taxes from their salaries and paying this over to the Revenue Commissioners. This is normally done on a month basis by the 14th day of the month, although if you pay and file the return online you have until the 23rd of each month to complete the return. You also have the option to set up a direct debit to discharge the total liability for the year.
I hope the above is of help to you.
If you require any further assistance please do not hesitate to contact me.
Kind regards,
David.
Hi I am setting up as a sole trader I will be selling flowers do I need to charge VAT on top of my flower sale price and if so is it @23%
Thanks a mil
Aiste
Hi Aiste,
If your turnover exceeds or is likely to exceed €37,500 (in the case of services) you are required to register for VAT. If you do not think you will exceed this threshold you will not need to register or charge VAT unless you elect to do so. Why not have a look at our blog post on VAT registration?
If you do choose to register, the Revenue website states that the VAT on sale of flowers would be chargeable at the reduced rate of 13.5%. Please see the following link to the Revenue Commissioners website.
If you require any further assistance please get in touch.
Kind regards,
David
Hi there, I am wondering if you could help me with a few questions.
I am currently working full time but want to start up a company on the side. I am wondering if it is possible to start up the company and create my website and start selling online but not register for tax etc for a while until i get an idea of the possible income from it?
If I earn 30,000per year and my husband earns 15,000 is there a certain amount i would be able to earn from my company without having to pay any tax atall?
would really appreciate your advice, best regards!
Hi Amanda,
Thank you for your comment.
Once a company start trading it is required to register for taxes (Corporation Tax at a minimum), with the Revenue Commissioners. The company is then liable for Corporation Tax at 12.5% on any profits it make. If the company makes a loss it may not be liable to corporation tax and these losses can be carried forward and off set against future profits of the company.
With regard to how much you can earn form the company without having to pay any tax – This depends on how much of your tax credits are been utilised by your current salaries. If ye are both paying tax on your current income it would be reasonable to assume that you are using all your tax credits and would pay tax on any income you earn from the company.
I hope the above helps with your query.
Should you have any other queries or require any further assistance please do not hesitate to contact me.
David
Hello David,
Thanks for your advise. I want to tell you that I have been living in Ireland since last 6 years and hence it fulfill the Definition of Residency in Ireland.
I expect atleast 10-15 thousand Euro results in a year.
What you would say on this ? Please advise.
Regards,
Amit
Hello,Orlando
I am going to set up chinese take away food with my friend as a sole trader but partnership and the turnover expecting less then 75000 euro.
Do we need need register vat?
If turnover is more then 75000 euro how much vat rate will be apply?
As my friend has full time job we agreed to pay him only 4000 euro a year. Then is he need pay extra prsi,universal charge,based on 4000 euro?
Could you recommend any free accounting software?I want to do accounting myself..
Thank
Hi May,
I have replied directly to your comment.
I look forward to hearing from you.
David
Hello Orla,
I am Non-EU National and having a STAMP 4, which allows me to setup business in ireland. Point 5 at below link confirm the premission to open a business on STAMP4.
http://www.inis.gov.ie/en/INIS/Pages/WP09000002#permission
Myself I am working and having job which I do not intend to leave. However my spouse has joined me in ireland and currently unemployed.
I want to open the Limited company or Sole trader and than I want to employee my wife as an employee becasue she has no permision to open business in ireland.
would know wheather sole trader or opening a limited company would be a good idea ?
Also I would like to know whether I can have my wife as a second director if i choose limited company or not ?
Please let me know your opinion on this.
Regards,
Amit
Hi Amit,
Thank you for your comment.
Either the sole trade or limited company would be good options for your business but really it depends on how much business you intend to conduct and expected results. As a sole trader, you would be personally liable for all liabilities of the business whereas a company structure would allow you to operate the business while retaining limited liability – something you may want to consider for your start-up business.
In regard to acting as company directors, I would recommend reading Leaflet No 17 on the Companies Registration Office website, as there is a requirement that at least one of the company directors are EAA resident or a bond will need to be put in place.
Please do not hesitate to contact us directly so we can advise you further on the above points, specific to your needs.
Kind regards,
David.
Hi Orla,
I’m wondering if you can help me?
I’m looking to set up as a sole trader under a business name. My work has several strands, 3 of which come directly under the new business (teaching singing/ voice work). The other two are singing and some arts admin (where I may work for other people and invoice them).
I’m wondering,
a) can I trade under both my business name and my own name?
b) can I receive and bank cheques in both names?
b)can I consider all of the work as one business (eg ME), and file one tax return, or do I have to consider it as several businesses?
Thanks very much for your help. I am about to register the business name, but just wanted to clarify these points before I do.
Regards,
Mallika
Hi Malika,
Thank you for your comment.
Yes of course you can trade under your own name and a business name and I would recommend that you try and keep both businesses streams separate so that it will be easy to identify the profit and loss of each.
With regard to the lodgement of cheques and to whom they should be made payable to, this would depend on the banking institution that you would use. I would therefore suggest meeting with them to discuss your banking needs.
Once you register as a sole trader your will be required to file an income tax return each year. This return will outline all income from all your business streams, including any other income you receive (e.g Dividends, Bank Interest, PAYE income etc…). Therefore you will only file one tax return each year.
I hope the above answers your questions.
Should you require any further assistance please do not hesitate to contact us.
Kind regards,
David
Hi Orla,
My question will probably sound very silly and it might be simple but I am new to this, I find it a bit confusing. Im a teacher, im a employee in one school and Im a self employed (for only a few months) for some teaching work I do outside the school too. My problem comes here; I obviosly use my name and I have registered with the Tax Office for tax purposes (did my returns) but I dont know If I can legally send invoices using only my ppsnumber. Havent registered for VAT either as the money is too little. The only thing I want to do is declare the income I get being a self employed basically and Im not 100% if Im doing the right thing.
Many thanks for your help.
Hi Maria,
As you are registered as a sole trader you will be required to keep a record of your income and issuing invoices to your customers will help in this regard. Together with your PPS number a basic invoice should include, your contact details (Name, Address, Telephone number/email address), the customer’s name and address, description of the service and the cost of that service.
I would suggest having a look at our blog post on VAT invoices for some guidance. If you require any further assistance we will be happy to help.
kind regards,
David
hi,can u have a part time business,my work is about 6 months of the year,
Hi Bernard,
Yes of course you can have a part time business. There are many seasonal businesses that people operate. E. G. during Christmas. The profit from this business will then need to be included on your Income Tax return submitted to the Revenue Commissioners each October.
Regards,
David.
Hi Orla,
My wife and I are thinking of setting up a business, however, we are not sure whether we should choose Sole Trader or Partnership. Which one do you think will suit us best?
Regards,
Jack
Hi Jack,
For two or more people entering into a business together a partnership or company structure might be the best option.
As a sole trader, either you or your wife would be personally liable for all liabilities of the business whereas with a partnership you would have equal liability. A company structure would allow you both to operate the business while retaining limited liability, additional security for yourselves.
Check out our articles on business structure and business planning – they may be of use to you.
regards,
David
I’m planning to start up my own sole trader business without leaving my PAYE job.
Is that permissable?
Hi Michael,
Yes, you can be a sole trade and also have income from a PAYE job.
You will include your PAYE income together with your sole trade income on your tax return each year. Details of your PAYE income will be given to you by your employer on a Form P60.
Kind regards,
David
Hi there,
This is a great idea for people to ask questions as I am finding it quite hard to get some information.
I want to become self employed, I am currently on lone parent and in receipt of rent allowance for the past couple of years and to be honest I dont know where to start. The first thing I have done is ring the social welfare and they have said I can stay on lone parent and earn up to €130 without affecting it, then another person there says I have to go on to the back to work allowance in which I will lose it after to years.
I looked into sole trader vs limited company and i think sole trader is the way to go. I dont get all the vat regulations as in will i have to pay vat etc.. I am making a product and selling it so income will completely vary. So i dont even know how the social welfare will work it out and I dont know if I will be better off, will I lose all my benefits because if this is the case I cant afford to set up.. Also what grants are available to me?
There are so many ways of going about this but I need the best way to be financially better off and this I cant seem to figure out.
Hope you can help me or even direct me in the best direction for a step by step guide on how to this.
Kind Regards
Louise
Hi
I am a PAYE worker in the IT industry.
I have been asked to do a relatively small job for a business and I’m presuming they will be require an invoice of some kind.
-
I’m not VAT registered. The additional income will be small.
-
Can I just write up my own Invoice with my name, address etc and put a date, description(which will be labour) and the invoice total?
Will that be enough for their accountant?
-
I plan to just declare the value of the invoice in my annual tax return.
-
Is that all above board or do I have to register as a sole trader, VAT etc etc.
-
I want to keep the paperwork to a minimum since it is a once off and the money is relatively small.
-
Any advice appreciated.
thanks, Patrick
Hi Patrick,
Please have a look at our blog post on invoices here, as a guide to completing your invoice.
An individual with assessable non-PAYE income of less than €3,174 is not required to register for self assessment and can continue to have the liability on such income assessed within PAYE by means of an adjustment to your Tax Credit Certificate. You would need to let the Revenue know how much additional income you will earn and they will adjust your tax credits accordingly. However you should register for self assessment if your sole trade income is greater than €3,174 by submitting a Form TR1 to the Revenue Commissioners.
If your income, in any twelve month period, does not exceed or is not likely to exceed €37,500 (in the case of supply of services) or €75,000 (in the case of supply of goods) you are not obliged to register for VAT.
I hope the above answers your questions.
Regards,
David.
Hi there. I wonder if you can help me at all? I wish to start up a small pet care related business. I want to set up a website and do some advertising to see if there is a client base for me first. Is it okay for me to do this without registering the business or registering with revenue? I am on an unpaid career break from another job. I’m not sure it will bring in that much money and wonder how much I need to be earning a week to be eligible to pay tax. Would be grateful if you could help me. Many thanks to you.
Hi Patrica,
We would be grateful if you could get in contact with us on 021 4310266. I have also emailed you directly.
Kind regards,
David
Hi Orla,
Great site/blog. Very helpful, thank you.
My question is also in relation to “Sole Trader” V “Limited”. I have read your post & I think I understand the difference. However, I am sure each case must stand on its own. I am unemployed but looking at setting up a business. I have no idea what the projected turnover could be (how long is a piece of string?). Basically, I will buying a product & selling it on for profit. I will be dealing with both Trade & Retail clients. My expenses will be my own running costs & basic office stuff. I guess I could easily exceed the €75k turnover.
So:
1. Sole Trader or Limited?
2. VAT registered or not? (Personally I think so)
3. What is the situation with PAYE & how do I pay myself & record that for Revenue?
4. Do I register under my personal name & then register a trading name? Which name should the bank account be in?
5. Should I talk to an accountant & a solicitor?
6. Any other advice?
Cheers,
Alan
Hi Alan,
I have replied directly to you.
Regards,
David
Hi,
I want to start a photography/videography business. How risky is it running as a sole trader in these businesses if I take out public liability insurance?
Also, if I take on interns do I have to fill out any paper work for this?
One last question, how difficult is it to file your own income tax ? Would I need an accountant?
Thanks in advance,
Conor
Hi Conor,
I have send you a mail directly about this.
David
I recently sent in a TR1 form to register myself up as a sole trader.
I got a letter from revenue stating that I ve been registered for Income tax.
My income tax registration number in the letter is the same as my wifes PPS number.
Is it supposed to be that way ?
Is it because both she is a PAYE employee & we are under the joint assessment system (with she being the assessable spouse)
Schalken,
If you are being assessed for Income Tax under joint assessment, one of you will be deemed to be the assessable spouse for Income Tax; in this case the assessable spouse is your wife. You can arrange to change this by nominating who this should be and informing the Revenue Commissioners. You might find the following helpful: http://www.citizensinformation.ie/en/money_and_tax/tax/income_tax/taxation_of_married_people.html
Best regards,
David
HI Orla
I am working as a paye worker but also have a small farm that after capital allowances doenst make any profit. however this year i have been charged with the 253 euro minimum PRSI payment which I believe may be related to self employed income. Is this correct for people who would already pay much more that the 253 mimimum as part of PAYE employment.
Hi Sean,
There is a minimum Class S contribution for self employment of €253. The contribution is calculated on your income prior to applying capital allowance. Therefore it may have been the case where you had profits prior to capital allowances being deducted.
If you require further assistance please get in contact with us.
Kind regards,
David
Sorry forgot to say turnover less than K75 a year for provision of goods so no registering for VAT
Thanks
Sarah
Hi Sarah,
Once registered as a sole trader you will be liable for Income Tax, PRSI and the Universal Social Charge (USC) on your taxable income for the calendar year. The level of tax payable will be determined based on your total income earned during the year, not just your income from the trade.
If you have any employee you will also have to register for PAYE/PRSI and you will have to pay employers PRSI on their salary.
Best regards,
David
Hi,
To set up as a sole trader, are these all the tax liabilities?
20% income tax
4% levy
3% Prsi
Thanks,
Sarah
Hi Orla
i have just registered as a sole trader. the work will be assembly and sometimes installation of home furniture. i have to register for vat. who decides the rate – to me it looks like mostly 13.5% where i assemble and install (goods and service) obviously it would be better for me at 13.5% because most of my purchases are at 21%. do i decide or is it the vat man and how does he let me know his decision. thanks
Hi Caroline,
This area of VAT can be quite complicated and can depend on a number of factors including whether the items are furniture or fixtures. I would recommend that you get advice from an accountant or tax advisor to ensure you are charging the correct VAT rates from the start. Otherwise you could leave yourself open if you have a Revenue Audit. Alternatively you should contact the Revenue and ask them for assistance in arriving at the correct VAT rate. Ensure you detail each product/service that you provide as each one could have a different VAT rate.
Best regards,
Orla
Hi there Orla,
I have recently been made redundant from my position and have decided to launch an ecommerce website. Am I ok to register as a sole trader for the purpose of selling electronic goods that will be imported from China?
In addition, how much would it cost for me to register the company name and become LTD?
Thanks in advance
-Jon
Hi Jon,
I’ve passed your query to my colleague Seamus Parfrey who should be in touch shortly.
Best regards,
Orla
Hi
I set up a company as sole trader, but for first year I did not do any business and it may stay for next year. I am tax registered, but not sure if I supposed to pay any PRSI if my business do not record any sales or inocme? Is there minimum amount of PRSI that have to be paid by sole trader iven if hi do not record any income?
Thank you for your respond.
Regards
Tom
Hi Tom,
Self employed persons are exempt from PRSI where reckonable income is below €3,174.
However please note that because you are tax registered you are obliged to file an income tax return with the Revenue Commissioners even if you did not record any sales.
Best regards,
Orla
Hey,
Love the blog, wonder if you could help ne.
I want to register as a sole trader and i can see myself earning 2 or 3K on Web-Design for the year on top of my current employment which is just below the threshold for income tax…If I register as a sole trader does that mean my whole wage becomes liable for tax?
Thanks
D
Dear Sirs,
I´m from Germany and live here since 4 years.Every year we´ve made the income tax with the help of a tax consultant.We don´t pay tax and we don´t get something back(under 37500€)and the consultant is expensive.In Germany you can buy programs on a cd (8-10€)for making your tax.It´s very easy to do it.Is it possible to get such a cd here in Ireland to make the income tax in an easy and cheap way?
best regards
Bernd Lehmann
Hello!
If you want to prepare the return yourself, the cheapest way to do it is to register for the Revenue Online Service (ROS) http://www.revenue.ie. You can then complete your income tax online. There is a new option which will import the information from your last return to guide you in preparing this year’s return which should make it easier for you.
You can find some guidance on the income tax system here: http://www.revenue.ie/en/business/self-assessment.html
Bear in mind that it is the busiest time for the tax office so if you want to file on ROS you should register without delay.
Best regards,
Orla
Hi, My wife is a housewife and wants to work for a franchise company running 2 classes a week on a commission basis. Her yearly profit would be approx €4000 – €5000 a year. She was told she has to register as a sole trader. But I want to know is it worth her while? What tax would she need to pay? or would she just be working for nothing at the end as we would probably loose FIS and Home Carers too.
Thanks for your help
Hi,
If your wife is earning about €4,000 – €5,000 per year then she will need to register as a sole trader. She will need to pay income tax at 20%, PRSI at 4% and Universal Social Charge of 2%. Her income tax can be reduced by any tax credits she may be entitled to.
Due to her level of income, she may still be entitled to the Home Carers Credit – see http://www.revenue.ie/en/tax/it/leaflets/it66.html for details.
You should check with your local social welfare office to see what effect earning this income will have on your FIS to see if it is worth it.
Best regards,
Orla
PS: A handy tax calculator can be found here http://www.thejournal.ie/budget-calculator-2011/#basic-calculator
Hi,
Just wondering if you could help. I am currently working as an electrician for a company.I am wondering if it is possible to register as a soul trader paying taxes etc. without it effecting my current employment and tax contributions or what is the best way of going about it?
thanks
Hi Colin,
Thanks for your comment.
You can register as a sole trader while still remaining an employee of another business.
When you prepare your tax return at the year end, you will need to include both your income from your sole trade and your employment. Note that you only get one set of tax credits and cut-off to be used against all your total income.
If you need any assistance in setting up, please let us know.
Best regards,
Orla
Hi Orla
Wow Fantastic site, you don’t expect to get this kind of service for free. well done.
I have a quick question, i have just completed a dog grooming course and will be hopefully grooming the local dogs in my area. I am a full time PAYE employee and so is my husband. I really don’t expect to earn too much its more of a hobby really but my husband wants me to register as a sole trader. What implications does this have for my PAYE.Also I am paying an A1 stamp in my current employment and i see you mention in other posts that i would have to pay an S stamp, to be honest i don’t really expect to earn more than a couple of hundred euro a year doing this so would I still have to pay an S Stamp.
Thanks again.
Liz
Hi Liz,
If you believe that your income from your business will be less than €3,174 then there is an option to have the tax on your small business taken care of by adjusting your tax credits and cutoff point. Any tax on your business profits will in effect be paid for through your employment.
Once you have calculated your net sole trade income you should contact the Revenue Commissioners on 1890 22 24 25 and ask them to incorporate same into your Notice of Tax Credits. The implications of this is that the Revenue Commissioners will reduce your tax credits and standard rate band by the amount of your net sole trade income and you will notice a decrease in your net take home pay from your PAYE employment as the tax arising on your sole trade income will be collected through your salary. You will need to have your PPS number to hand when you ring the Revenue Commissioners.
Self employed persons are subject to class “S” PRSI on their self employed income at a rate of 3%. Please note that where an individual’s reckonable income is less than €3,174 there is no liability to PRSI.
If you have any further queries please do not hesitate to contact us.
Best regards,
Orla
Hi Orla,
I am a full time employee. Thiking of opening up business but keeping my job. What is the best choice.
.. sole trader or limited company?
what are the tax implications? how will my tax be calculated?
will I still have to make a tax return?
how about PRSI?
thank you
Peter
Hi Peter,
We would be delighted to help you with this. Please forward your contact details to Seamus Parfrey seamusp@parfreymurphy.ie or give us a call on 021 4310266.
Best regards,
Orla
Hi Orla,
Just wanted confirmation on something if you start to trade say july 2010 i understand your first income tax return will relate to profits from July to Dec 2010 and this will have to be filed with revenue by Oct 11. Each year following do you have to split your accounts by months to fit in with Jan – Dec tax dates.
Hi Rachel,
If you are preparing the tax return yourself, then the easiest thing to do is to prepare your accounts with a December year end, e.g. Jul to Dec year 1, and Jan to Dec thereafter.
Best regards,
Orla
Hi im planning on setting up a business, it will be online based for a while until I get more stock and money built up to take it to other businesses and individuals.
I was thinking of a limited company because I want to protect my home. Ideally I wont be taking a loan to set up but build it up gradually myself. can you give me any advice on this and on the costing of setting up a business inc tax.
Thank you
Sorley
Hi Sorley,
I’ve sent you a mail about this.
Best regards,
Orla
Hi Dmitry,
If you are dealing with all (VAT-registered) business customers the best thing may be to register for VAT anyway as you can claim back the VAT on your purchases, advertising etc. Your customers won’t mind if you are registered for VAT as they can claim it back.
If, however, your customers will be mainly private individuals, then you will need to charge them VAT. This will increase your prices by 13.5% / 21% and your customers will not be able to claim back this VAT. Therefore you need to weigh up how much VAT you can claim back on advertising and other purchases with the effect registering for VAT will have on your sales.
Best regards,
Orla
Hi Orla,
could you advise please,do I need to register for VAT if I don’t know how my business will go, but I have to spend more than 10000 Eur per year for advertising, it is reason to register just to get some money back?
Regards Dmitry.
Hello! I just move from Austria to Ireland. In Austria I run a business (sole trader) for the last 3 years and I would like to do so in Ireland as well.
I would have 4 questions about that and do hope that you can help me.
1. If I register as a soletrader I would have to make a Income Tax Return once a year – do I get this right? – Nothing else?
(I’am going to have a very smal craft business and might have a total sale volume of 30000 per year and about 9000 benefit out from that)
2. In Austria we have something for small business so that I did not have to pay income-tax. This was valid as long as the benefit is not more that 10000 per year.
Is there anything like it in Ireland or do I have to pay tax from the fist Euro I earn ?
3. Do I have to pay anything for health insurance? I read something from 253 Euros (PRSI) but do not know if that is per year or month.
4. How much does it cost to register a business at the revenue.
Many thanks
Sophie
Hi Orla,
I want to open a website that allows people to advertise there academic services on it.
so I have couple of questions
1- after registering will I have to supply how much I made from the website every year or quarter?
2- I am a current employee at the moment, so if I make any earnings from the website will each one be taxed separately by revenue or will my salary and what I make from the website be added up and then taxed?
3- other than keeping a record of how much revenue I have made do I have to do any other book keeping for the revenue office or the CRO people?
Hi Jacob,
Thanks for your comment. The answers to your queries depend on whether you set up as company or as a sole trader.
Sole Trader
1. As a sole trader you will need to submit an annual Income Tax Return .
If you are registered for VAT you will need to submit VAT returns every two/four/six months.
2. Your income from your sole trade and your employment income will be added together on your income tax return to calculate how much tax is owed.
3. You will need to keep proper books and records, including records of income, expenses, fixed assets bought etc as well as sales and purchases invoices, bank statements etc. If you have never kept books before then it would be advisable to go on a bookkeeping course or to outsource it to a bookkeeper.
Company
1. You will need to submit a Corporation Tax return to the Revenue Commissioners each year and an Annual Return to the Companies Office.
If you are registered for VAT you will need to submit VAT returns every two/four/six months.
2. You will need to submit an income tax return each year which will combine your current employment income with your salary from your new company and tax them together.
3. You will need to keep proper books and records, including records of income, expenses, fixed assets bought etc as well as sales and purchases invoices, bank statements etc.If you have never kept books before then it would be advisable to go on a bookkeeping course or to outsource it to a bookkeeper.
If there is anything I can help you with, please let me know.
Best regards,
Orla
The Form TR1, question 11 asks to state Business Name.
Does that mean I need to register Business Name before becoming Sole Trader ?
Many thanks,
Alex
Hi Alex,
You can register a business name after you submit the TR1 or before or you can decide not to use a business name and just trade under your own name.
Best regards,
Orla
Hi Orla
I hope your still checking this blog but id take a chance!
I have been thinking of setting up as a sole trader for some time now if fact in March I droped some sample product(postcards of local landmarks) in to two local shops the shops came back to me recently looking for more. As if yet I havent registered as a sole trader but with these new orders I am thinking now is the time. My circumstances are that I am already full time employed would this cause any issue even down the line if I become a sole trader? Also could I claim for any expenses incured so far since february or march in short can I claim for anything before the tr1 form has been filled out? I have recieved cheques from the shops but have not cashed them yet as im unsure of what steps to take.
Regards
Kevin
Hi Kevin,
Yes indeed, I am still checking the blog!
In answer to your queries:
You can be employed and be self-employed at the same time so it should not cause an issue. Your income from both sources are combined when calculating your income tax, USC, PRSI etc and you need to include both in an income tax return each year.
You can claim for expenses incurred up to three years before the commencement of the trade. More information is available in this Revenue leaflet.
Best regards,
Orla
HI ORLA I AM THINKING OF SETTING UP MY OWN BUISNESS REPAIRING ROLLER SHUTTERS AND INSTALLING IM AT THIS GAME 10 YEARS NOW BUT I HAVE NOT GOT THE SLIGHTIST NOTION ABOUT BUISNESS END ECT I DONT WANT TO TIE MY SELF TO ANYTHING JUST INCASE IT DOSENT WORK OUT AND I LOSE MY HOME IF SAY THINGS GO BAD. I WILL BE LOOKING TO EMPLOY ABOUT 2OR 3 PEOPLE STARTING OFF WHAT WOULD BE THE FIRST STEPS WOULD I BE BETTER OFF REG SOLE TRADER OR LTD COMPANY
Hi Jason,
Have a look at a quick summary of the differences between trading as a sole trader and as a limited company here.
In relation to protecting your family home, trading as a sole trader will mean that all debts incurred by the business become personal debts if the business ceases. This is why many people prefer to form a limited company.
A limited company provide complete protection however. In general terms, if directors are running the business recklessly or trading while insolvent, the directors may become responsible for the debts of the company. Furthermore, banks often ask directors to sign personal guarantees which mean that if the company is unable to repay the bank, it falls to the directors.
I’m not sure where you are based but the best thing to do would be to call in for a meeting to discuss how to set up, what the best option for you would be, how the tax system works etc. The meeting would be free of charge and without obligation.
Best regards,
Orla
Hi Orla,
I have been working as an employee in Ireland for the last 8 years. My company made me redundant in September this year and I left the country to start living in my country of origin where I am at the moment.
An opportunity to distribute certain product came up with a local company so I was thinking of becoming a sole trader in Ireland and start distributing their product over there. However, I do no want to live in Ireland full time, wouldn´t mine travelling over though as the business will require.
I wonder 1) what are the steps I need to follow to start my distributing business and 2) how much taxes roughly will I have to pay. My understanding is that one pays taxes as sole trader only when profit is generated. Could you please confirm this.
3) Is it feasible and desiderable registering my company in Ireland or is it better for me to register it in my country and trade in Ireland?
Thanks for your time,
Mari
Hi Mari,
As your sole trade will be carried on in your home country where you will have your fixed place of business and you will only be making supplies to Ireland you should consider registering for taxes in your home country.
If you have any future queries, please do not hesitate to contact me.
Best regards,
Orla
Hi Orla
Great website and may i say this is a fantastic and trucly considerate service you offer at these times.
My question is, i am currently a PAYE employee. However my company is at risk of closure. However the business unit i head up is quite profitable and my plan is to trade as a sole trader with my existing customers, should my company wind up. However if i am to support my current clients, i must be in a position to start trading the day following the likely closure of my current company, else my crop of clients will have no choice but to find somebody else. However there are certain formalities that i would need to attend to, now, to allow me to trade within 1 day of my company closing, notably i must be VAT registered. My question therefore is, can i successfully apply for a VAT registration while i am a PAYE employee? What is the normal processing time to successfully obtain a VAT number? Assuming my company still continues to trade for maybe 6-9 months, my VAT activity would essentially be dormant. Will this be an issue?
Hi Declan,
Thank you for your kind words about the blog. Much appreciated.
You can register as a sole trader (for VAT and income tax) while you are still an employee. It can take between 2 and 4 weeks to register depending on the time of year. Have a look at the VAT registration post to see if you need to register for VAT at all. You will still need to register for income tax in any case.
You should register as close as possible to the time when you will begin trading. However, I understand your dilemma. If you do decide to register ahead of time, you will still need to file VAT returns, even if they are NIL.
Best regards,
Orla
Hi Orla,
mainly referring to an earlier post by Barry: Which is better (more affordable) setting up as a sole trader or limited company ? I wouldn’t be able to say if there is very little debt involved with the business if that’s the most important criteria for such a decision. Say, running a food shop the most critical thing I would think of is the rent for the premises ?
Many thanks
Michael
Hi Michael,
Running a business as a sole trader can be more cost-effective than as a company in terms of accountancy and bookkeeping fees as there are fewer returns to be filed and forms to be filled out. For example, if running a company you would need to complete a Corporation Tax return as well as an Income Tax return.
In terms of which is better from a tax point of view, the general rule is that if you are spending all that you are earning and there are no spare profits in the business, there is little point in being in a company.
If you are interested in making contributions to a pension, a company can be the better option but this needs to be weighed up against the additional paperwork and accountancy fees involved in setting up a company.
There also may be a good legal reason to be in a company to offer some protection to the owners of the business in the case of a claim being taken against the business. You would need to talk to your solicitor about this.
For more information, have a look at my previous post Sole Trader V Limited Company.
Best regards,
Orla
[...] more information and to protect the privacy of the person asking the question. As suggested by Sean’s comment, I’ve compiled a list of the most popular questions and their [...]
Thanks so much for the reply, Orla. That’s very helpful.
Hi Orla,
I’m currently a PAYE employee. I work 2 and half days a week and earn just under €25,000 per annum. My husband is also a PAYE worker, currently on reduced hours, and earns approx. €60,000.
As a hobby I make pictures and soft furnishings for children. A local shop has expressed an interest in selling some of my pieces in the run up to Christmas.
My question is whether I will need to register as a sole trader if I want to do business with the shop? Will they look for a tax number from me?
Secondly, if I do register as a sole trader will I need to pay income tax on my income from this, and if so when would this tax need to be paid? Any income I make from it would be very low- will I have to pay 20% tax on it, or is there a threshold under which I do not need to pay tax? Thanks so much for your help.
Kate
Hi Kate,
In general, a married couple in 2010 can earn up to €72,800 at the 20% tax rate, anything earned in excess of this is taxed at 41%. As your husband earns the higher salary I take it he has the higher standard rate band of €45,400, thereby leaving you with the €27,400 rate band. As your salary is €25,000 you are left with €2,400 which can be earned at the 20% rate.
An individual with assessable non PAYE income of less than €3,174 is not required to register for self assessment and can continue to have the liability on such income assessed within PAYE by means of coding in the income against their tax credits for that year. You would need to let the Revenue know how much additional income you will earn and they will adjust your tax credits accordingly.
However you should register for self assessment if your sole trade income is greater than €3,174 by submitting a Form TR1 to the Revenue Commissioners. The shop will not necessarily look for a tax number from you but will more than likely look for an invoice. Please note that you should keep a record of all expenses incurred in respect of your sole trade as these can be deducted from any turnover you make in a given year.
Once you are registered as a sole trader you are obliged to file annual income tax returns with the Revenue Commissioners on or before 31 October each year. So for example your 2010 income tax return would need to be filed with the Revenue Commissioners on or before 31 October 2011, you will also need to pay over the tax, if applicable, on this date.
You should also be aware that Class “S” PRSI, the health levy and the income levy will also be charged on your sole trade profits.
Best regards,
Orla
I am currently unemployed and in receipt of jobseekers allowance for myself and my wife. For a hobby my wife makes her own hand crafted jewelry, which she wishes to sell at craft fairs events around the country. The profit from this would not be significant, it would purely be a hobby and a social networking exercise. Do we need to register this as a business? If we do will it endanger our jobseekers allowance?
Hi Max,
Any income from self-employment will be included in the means test for Jobseekers Allowance. See here for more information. Although you mention that the profit would not be significant it could still be construed to be a small business.
Best regards,
Orla
Thanks for the blog. It’s very helpful.
My question is about picking the dates for the accounting year. I started out as a sole trader at the beginning of November, but ideally I’d like my accounting year to run from 1st January. My question is whether the time between now and January will count as my first accounting year (if that makes sense) and if I’ll have to pay the minimum annual PRSI and levies for that period, starting again with those obligations again in January.
I’ve paid some contributions this year for PAYE work, and I’m not sure either if they’d be offset against those minimum contributions.
Sorry if this doesn’t make sense. I’m just trying to make sense of it all and when I rang Revenue, they agreed that it was ‘an interesting question.’
Hi Siobhan,
An interesting question indeed!
As you commenced to trade in 2010 you are obliged to file a 2010 income tax return with the Revenue Commissioners. Your sole trade profits for the period ended 31 December 2010 will need to be declared on this return together with details of any other income and you will need to pay PRSI on this income.
As the tax year is on a calendar basis, it is easier to also do your accounts on this basis. i.e. from January to December. (This can also avoid potential additional income tax liabilities arising when the sole trader ceases to trade.)
So your first set of accounts will be from the beginning of November to December 2010. Even if you decided to do your accounts from November 2010 to October 2011, it won’t avoid the need to send in an income tax return for 2010.
With your employment you would have been paying class A PRSI. Now that you are self employed you will be paying Class S PRSI. These two classes of PRSI are totally separate and therefore the PRSI you have already paid in 2010 will not be taken into account in respect of the Class S PRSI you may have to pay on your sole trade profit for 2010.
If your sole trade profits for the period ended 31 December 2010 are above the relevant PRSI threshold of €3,174 then you will have to pay 3% PRSI on same. Self employed persons are exempt from Health Contributions where the annual income is €26,000 or less in 2010. The minimum annual PRSI contribution for self employed persons is €253 in 2010.
I hope this answers your query but if you have any more questions, please let me know.
Best regards,
Orla
Hi Orla,
How many days/weeks do I have to send in the TR1 form after I started my business as a sole trader? Or should I send the TR1 before I did any work?
Regards,
Tom
Hi Tom,
You are obliged to submit a TR1 and register for taxes with the Revenue Commissioners as soon as you commence to trade. You should ideally send in the TR1 form as soon as you know you will be commencing. If you have already commenced, just send in the form as soon as you can. Just remember to note the date you actually started trading on the form. If you are registering for VAT, only invoices date on or after this date can be included in your VAT return.
Best regards,
Orla
Hi Louise,
I will be travelling to Central America for 6 months in Dec 2010 and then (Visa Pending) I plan to emigrate to Canada.
During my 6 months in CA I will start and work on an online business and I intend to keep it going in Canada.
My question is should I register as a sole trader in Ireland before I leave (I think this will impact my business credibility if I do not) and then become a sole trader in Canada when I get there or what would you advise?
What are your thoughts on above?
Cheers!
Len
Hi Len,
You state in your comment that you will actually start the business in Central America so I am not sure why you would want to register for taxes in Ireland. Whether you register in Ireland depends on how long you will be trading in Ireland before you go. As you are emigrating you will need to both register and deregiser within the space of a few weeks. And you will need to submit an Irish tax return for 2010 while you are on your travels. If you will not actually trade in Ireland before you go, there is no point in registering.
You will need to check with the relevant authorities in Canada about setting up a business there and also where you will be resident for tax purposes in 2011. This may give you a better indication of where you should register the business.
All the best with your travels and your new business venture,
Orla
Hi Sean,
Many thanks for your kind words about the blog and your feedback.
The main reason I don’t reply to some queries publicly is when I need to request further information and I don’t want to invade someone’s privacy. Also, when I was on annual leave my colleagues responded to some of the queries by email.
However, I will have a look at the queries and their answers and see if I can put together a blogpost that would be useful to others.
If you have any queries I can help you with in the meantime, please leave a comment or email me on blog@parfreymurphy.ie.
Best regards,
Orla
Great website. A lot of the questions above apply to me, but its a pity the answers weren’t posted publicly. Would be a great resource and prevent duplicate questions.
[...] business as an employer. This is usually done when first registering for tax by submitting either Form TR1 (sole-traders and partnerships) or Form TR2 (companies) to the local tax district. If you have [...]
Orla,
I have been placed on a 3 day week and am considering starting my own company in the same consulting area as my employers company. There are no conflicts of contract. Is there any restriction on having two employments at the one time. One where i will be a PAYE member of staff and the second in my own company i will be owner Director. My employer cannot offer me full time work.
Hi Joe,
You can have two employments at the same time even where you are the owner/director in one company. When you complete your income tax return at the year end, both salaries will be taken into account when calculating your income.
You will still have just one set of tax credits and one overall cut-off point though. You may need to transfer some of your cut-off point and/or tax credits to your second employment if they are not being used in your first employment. You can call the Revenue PAYE line to do this 1890 222 425.
Best regards,
Orla
Hi Orla,
Could you help me with my query, this year in July I did a one one-off job, soon after I did my work I have presented project to company.However only on 10th September 2010, I have registered for self assesment/ income tax purpose with Revenue.On the TR1 registration form I stated that I started trading in September, however I completly forgot about the fact that I did a job in July, I have not yet invoiced the client for the July job as yet, currenly I would like to send invoice to the company for work and then seek a payment. Could you please advise if the fact that I did the job prior registration for the income tax may have cause problems? Also If I am to issue first invoice, what date should I date my first invoice in that case? thank you in advance for help.
Hi Peter,
I’ve just sent you an email on this.
Best regards,
Orla
Hi Orla,
I am thinking of registering as a sole trader but the newish VAT rules have me a little confused. I will be working as a software developer and most, if not all, my clients will be in the US. Would I have to register for VAT if I make over 37,500 a year from this service? I’m not sure I can charge these clients VAT as they have no means to reclaim it so I’d have to take the hit.
Thanks.
Hi Orla,
I had a small business retail outlet selling mans and ladies fashion. I never registered for VAT as our yearly income never exceeded €70,ooo – Would I have any outstanding tax liability now that I have ceased trading?
Hi James,
Thank you for your query.
As long as you were never required to register for VAT and you never elected to register for VAT you should not have an outstanding VAT liability on cessation of your business.
Best regards,
Orla
Hi Orla,
I pay PAYE at present and I’ve a business idea for which I would be a sole trader (and possibly one other colleague will come on board in a few months). We want to test the waters first in the market, if I register a business name now does that automatically make me liable to being self-employed etc. I’d like to register the name now but if I don’t go ahead with the venture am I opening myself up to Revenue Commissioner problems.
I ask because: a) the business might not be legitimately running until 2/3 months after registering the name, b) the business will be registered under my name but a partner may join within a few months, c) I might not even go ahead with the venture after registering the name. What would the position be under those three scenarios.
Your advice would be very much appreciated.
Regards
Seán
Hi Sean,
Thanks for the query.
You can register a business name separately to registering for taxes so it is possible to just register the name for the moment and if you decide to go ahead with the business you can then register for tax.
If there will be another person in the business with you, then you will need to decide what form the business will take:
* Trade as a sole trader with the other person as an employee
* Form a partnership
* Form a company (may not be suitable if you are not sure the business will take off)
If the business becomes a partnership than you can re-register the name.
Note that registering the business name does not give protection. Once you submit the form to register a name, the CRO does not check the name against the registers for duplications. However, if you register a name that is already in use by someone else, for example calling your restaurant “McDonalds” (even if your name is McDonald), then you can expect to get a letter from their solicitor.
Best regards,
Orla
Hello, can you register a business name in Ireland if you are not a resident in Ireland? What if you had a ltd company and paid a bond for a non resident director and then wanted to register a completely separate business name – can you register a business name? Thank you, C
Hi Claire,
Thanks for the comment. A person who is not resident in Ireland can register a business name here as long as they have a trading address in Ireland.
An Irish company can also register a separate business name.
Best regards,
Orla
Hi Orla ,
I im doing my tax returns at the moment, this is my first year as a sole trader on the back to work enterprise allowance. I started my business the middle of last year. I was just wondering is loan parents or back to work allowance taxed???
Hi,
Thanks for the comment.
* Lone parent payments are taxable
* Back to work allowance payments and back to work enterprise allowance payments are not taxable
Lone parents payments and the back to work (enterprise) allowances are not subject to PRSI.
For other readers with similar questions, there is a useful table on the Citizen’s Information site which outlines which Social Welfare payment are taxable and which aren’t. You will need to check separately to see whether a particular payment is subject to PRSI.
Best regards,
Orla
Hi, is there any minimum tax that has to be payed per year ?
Is that true that if you’re self employed you’re not eligible for certain social welfare benefits, as Family Income Supplement ?
Hi Jurga,
There is no minimum income tax to be paid per year but there is a minimum PRSI for self-employed people (class S) that much be paid each year – €253.
A summary of the differences in social welfare entitlements for self employed individuals (class S) and those on other classes can be found here. As you can see self-employed people get far fewer benefits than Class A (employees). Reform of the PRSI system is one of the issues being discussed ahead of the next budget, so it is possible that there may be changes to this system in the near future.
Regarding Family Income Supplement, you will not qualify if you are only self-employed, you (or your partner) must be an employee to qualify. More information can be found here.
If you have any other queries, please let me know.
Best regards,
Orla
Hi Orla,
as I’ve written on the previous post, I’m planning to start up my own sole trader business without leaving my job.
AS i already know that i meant to be made redundant next year, can i start the business now and claim the Back to Work Enterprise Allowance (or the Short Term Back Enterprise Allowance)when I’ll be made redundant?
Thanks,
Matteo
Hi Matteo,
My colleague Kieran sent you a couple of emails regarding your queries. Can you let me know if you got them or if you have any other queries.
All the best,
Orla
Hi Orla,
my girlfriend is thinking of opening up her own beauty salon, she has been trained & worked in beauty for the last 5 year’s & was made redundant in Dec 2009, ive a few questions if you wouldnt mind looking at.
1 Which is better (more affordable) setting up as a sole trader or limited company (there wil be very little debt involved in the company)
2 ive looked at a page on the dept of social welfare where it states that a person who has been unemployed for a term can avail of full social welfare benifit for the first 12 months of the business. Is this easy to facilitate & what happens with compnay profits or any income she takes formt he business?
Thanks & sorry for the lenght of the mail
Barry
Hi Barry,
My colleague Kieran sent you an email regarding your comment above. If you have any other queries, please let me know.
Best regards,
Orla
hi Orla,
can i start up a sole trader business and work as eployee in another company at the same time?
i’m planning to oopen my own business but i wouldn’t leave my job!
Kind regards,
Matteo
Hi Orla,
I am thinking of helping my friends who are thinking of starting research on potential prospects, who might become clients in Ireland. For the purpose of printing brochures and namecards, is it required for us (each individuals) to register for income tax purpose as we do not have any quarantee that there will be any income at all, we just want to see if prospects will be interesed in our artist work or not, this project we plan to perform for six month starting in September ’10.
Second question is similar to above, if I offer my voluntary help to distribute the brochures and namecards free of charge, in case if name cards will contain my own name having in mind language barrier. Do I have to register for income tax or do my friends have to engage me under any contract. Will my friens by liable to any taxes? I add that I will not take any income from friends as this will be my voluntary help offered to them to perform this research.
I’ll be thankfull for help on this.
Best Regards,
Michael
Hi Michael,
Thanks for the comment. I’ve sent you an email on this.
Best regards,
Orla
Hi Denis,
I’m a graphic designer and I’d like to register as a sole trader. I’m currently travelling quite a bit and I’m planning to do my work while being abroad for extended periods of time. The downside of all this mobility is that I don’t have a current Irish address that I could use in the registration process. I’ve found some companies providing virtual office setup services, is it legal to use such an address for the purpose of registering for tax and a business name (and possibly VAT)?
Also do you know of any good companies that provide registration services like that for a fee? There’s plenty of them online but it’s difficult to choose the right one, especially from quite far away.
I’ll be grateful for any help on this,
Thanks
Hi Luke,
In order to register for tax purposes in Ireland you must first be Irish tax resident. In general, an individual is Irish tax resident if he / she spends 183 days in Ireland in a tax year or 280 days in aggregate in that tax year and the preceding tax year. Other factors that need to be taken into account are your ordinarily residence and domicile status which may also have a bearing on your case. The rules on Irish residency can be quite complex so I would need a better idea of your Irish residence status for the last 3 years and your plans for the coming 12 months to be able to give you more accurate information.
From my experience with the Irish Revenue Commissioners they may not process a client’s VAT registration where a virtual office address is being used as it may indicate that the individual does not have a permanent establishment in Ireland.
If you wish to proceed with registering for Irish tax purposes I would be more than happy to assist you as this is one of the many services which we provide.
Best regards,
Orla
Hi Luke,
Just checking to see if you got my emails.
Best regards,
Orla
Hi Orla
I am a sole trader and work in the interiors industry, our turnover has significantly dropped, to a point that a revenue official I have been dealing said about deregistering the company. what implication doe this have. can I still trade under my current business name and not charge or claim vat? Or does deregistering mean that the business completely ceases to trade. If so can I register another company name as sole trader and not charge or claim VAT as long as I stay under threshold.
regards
SL
Hi Sarah Louise,
Thank you very much for the comment.
If the turnover of your business falls below certain levels then you can cancel your VAT registration. The general thresholds are €37,500 for service businesses and €75,000 for businesses supplying products. (Further details of the VAT thresholds can be found here.)
Once you are sure that your turnover levels are below the threshold and will remain there, then you can complete the necessary sections of Form TRCN1 and send it to your local Revenue office.
If you do cancel your VAT registration, then you can trade as usual and you will still have the same number for income tax purposes and you can keep your business name. However, you can no longer charge VAT on your sales or reclaim VAT on your purchases.
Have a look at my post on cancelling VAT registration for some potential pitfalls.
Best regards,
Orla
PS: Although you mention “company” in your message, I have assumed that you are a sole trader with a registered business name.
can you adopt a business register number for example, if a company number is registered 682122 can a new business take that number 682122
Hi Mary, Denis,
The numbers are allocated in sequence by the CRO, so you can’t choose your own number.
I’ve sent you an email re this also.
Best regards,
Orla
can you register buisness number be the same as another company number
Hi Denis,
Thanks for the comment. Your business name number can indeed be the same as another unrelated company number. The numbers for each register are allocated in sequence. At the moment the last business name registered has the number 411419 and the last company registered 483894. As you probably know, you can do a business number and company number search on http://www.cro.ie.
Best regards,
Orla