Managing your music business accounts. 4 th July Kevin Kelleher Secretary/Finance Officer RIAM

Transcription

1 Managing your music business accounts 4 th July 2014 Kevin Kelleher Secretary/Finance Officer RIAM

2 Introduction Forms of Business Structure Keeping Proper Records Tax Matters 2

3 Sole Trader Legal Structures Run the business alone Your risk and responsibility Simple to set up Register as self-employed Form TR1 Revenue online service Register a business name with CRO VAT 3

4 Partnership Legal Structures Two or more persons Joint risk and responsibility Register as a partnership Form TR1 Register a business name with CRO Essential to have formal partnership agreement How are profits shared? Are holidays paid? What happens if one partner gets sick and can t work? 4

5 Legal Structures Limited Company Generally not necessary for a small business Must register with the CRO TR2 Keep a company register Hold an Annual General Meeting and file reports Have books audited by a chartered accountant annually Lodge the accounts annually with CRO 5

6 Music Teaching Business Sole Trader 6

7 Book-Keeping Keep proper books and records Keep it simple at first A notebook or basic cashbook One side for income and one side for expenses List everything you earn and everything you spend An invoice should be raised for each class being taught Keep all receipts, invoices and statements Preferably keep a separate business bank account All cheques and cash received should, in the first instance, be lodged to this account 7

8 Book-Keeping Expenses, in so far as possible, should be paid by cheque or card cash doesn t have the same audit trail Update books regularly - good habits from day one You do not have to have computerised accounts, as long as the information is kept in a tidy and logical manner. Why bother to keep books at all? It s a hassle! Preparing a Profit and Loss account a summary of your books over a given period. Basis for preparing your Tax Return 8

9 Tax Returns PAYE - the onus for paying your tax is on the Employer Self-Employed - the onus for paying your tax is on you Legal Obligation! Must submit a tax return by 31 st October each year Tax year runs Jan 1 st to Dec 31 st Revenue wants to know: How much money did your business bring in? What are your legitimate business expenses? Details, if any, of employees and wages paid? 9

10 Tax Returns Popular misconceptions on filing tax returns I don t earn enough to file a tax return I m making a loss so it doesn t affect me I m not liable to pay tax so I don t need to file a return All sole traders are required to keep proper books of account and submit an income tax return regardless of whether they make a profit or a loss. 10

11 Tax Returns Revenue will assess your liability for income tax, PRSI and the Universal Social Charge based on the information supplied by you and any amounts that you owe are paid directly to Revenue. You will be entitled to the normal income tax credits and reliefs and to claim legitimate business expenses. Form 11 is the return of income that you, or your accountant submit to Revenue on or before 31 October each year. 11

12 Tax Rates and Credits Personal income tax rates Single person 32,800 taxable income at 20% - Bal 41% Married couple (one income) 41,800 Balance at 41% Personal Tax Credits Single person 1,650 Married couple 3,300 Self-employed PRSI contribution, Universal Social Charge PRSI 4% No income limit Universal Social Charge 2% up to 10,036 4% between 10,037 to 16,016 7% 16,017 to 100,000 and 10% > 100,000 12

13 Taxation Reliefs Medical expenses not covered by the State or by private health insurance Med Form 1 Dental expenses Med Form 2 Health Insurance Premiums granted at source Long-term care Tuition fees 20% up to max 7,000 Start your own business two-year income tax exemption up to a maximum of 40,000 income per annum if unemployed for at least 15 months 13

14 Tax Offsetting General Rule: Expenses incurred must be wholly and exclusively for the purpose of your business. Music materials and consumables Reasonable proportion of household bills - % of area Internet and phone- Broadband IT- PC, printer, software, stationery Advertising and promotion Professional Fees Capital Allowances 12.5% pa for 8 years Bank and other charges 14

15 Tax Offsetting Reduce your tax bill Claim all of the tax credits available to you Pension contributions Split income with Spouse Offset tax losses against PAYE of Spouse Motor expenses Incorporate the business % tax Engage an Accountant and/or tax advisor 15

16 Useful Sources County Enterprise Boards 16

17 Thank you for Listening Any Questions? 17