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Small Business Owners Tax Tips

With cash being king and tax bills representing cash there has scarcely been a more important time to manage tax liabilities. With the annual tax deadline fast approaching - 31st October for paper filing or 16th November for online filing – there are some relief’s available to reduce your tax liability and there is still time to plan for this years and next years tax liabilities.

Tip No 1 – pension planning

  1. An additional pension contribution may be made on a tax effective basis before the filing deadline allowing a taxpayer claim the tax relief arising against their 2009 income tax liabilities.
  2. The maximum tax effective contribution ranges from 15% of net relevant earnings for persons under 30 years of age to 40% of earnings for persons aged 60 or over. This is subject to an overall deemed earnings cap of €150,000 in 2009.
  3. It is important to remember that a decision on a pension investment is first and foremost an economic decision for the taxpayer concerned.

Tip No 2 – other investments

  1. There are relatively few “all of income” tax shelters now remaining. Examples of schemes which are still available are Film investment and business investment (BES)  schemes.
  2. A significant cash flow advantage of many Film schemes is that the promoters will usually facilitate financing of most if not all of the required investment.
  3. It should be noted that a 2009 BES or Film scheme investment can not be used to reduce a taxpayers 2010 preliminary tax liability.

Tip No 3 – Maximise tax credits and 20% standard rate band

  1. Where both spouses are in receipt of income the maximum amount that can be earned between them before paying tax at the 41% tax rate is €72,800 per annum.
  2. So it is very important to ensure the maximum of €72,800 in the 20% tax band is fully used before incurring the higher rate. PAYE tax credit – This is not due to self employed taxpayers per se BUT is available where a taxpayer is in receipt of social welfare income.
  3. Other credits and relief’s ranging from an aged credit for over 65’s to relief for service charges, rent relief, medical expenses and carer allowances should always be looked at in advance of the filing deadline.
  4. Tuition fees: Tax relief can be claimed on fees for qualifying college courses being taken by you, your spouse or child. The maximum relief available on qualifying fees is €1,000, based on 20 per cent relief on the upper limit of €5,000.
  5. Other relief’s available: You can claim tax relief on donations of €250 or more per annum to approved charities and may be claimed at the marginal (higher) rate. Tax relief is also claimable on trade union membership and schedule e flat rate allowances may be available if you have some employment income. Refunds of DIRT may be available if over 65 and fall within certain income limits.

Note in particular that taxpayers are entitled to make a back year claim for up to 4 years for relief’s due but not claimed

Dermot McCrystal FCA is the principal in the firm Dermot J. McCrystal & Co., Chartered Accountants & Registered Auditors, Monaghan who specialise in business advice and tax solutions for small to medium size businesses. Dermot can be contacted on 047 81333 or at dermot@dmccrystal.com

Watch out for Dermot’s next article entitled “Keeping it in the family” which deals with ways to carefully plan the transfer of business assets to family members especially on retirement using tax efficient planning.

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