In Ireland, tax payers are required to manage their finances so that they can pay tax when it is due. While it’s not always easy to find time for administration when you’re running a busy business, keeping your tax affairs in order is essential if you want to avoid Revenue interest, penalties and fines.
One practical tip that I often share with GroForth clients is to open a separate bank account for Revenue bills. This helps in a number of ways. For example, if you set aside about 20% of your income from each invoice you issue, you will have money available to pay your tax bill at the end of the year.
Likewise, if you employ staff, you can put 10%-20% of the net amount of each invoice into your Revenue account so as to ensure you have money available to meet your PAYE obligations. This is important because if your payment to Revenue is late, you will be charged interest.
If your business is VAT-registered, you can transfer the VAT element of invoices into this account so that you will have money available to pay over to Revenue when your VAT is due. If you do not pay VAT on time, interest is charged on a daily basis from the date the payment is due until the VAT is paid.
The peace of mind that you get from knowing you have money available to meet your tax bills is really important but so, too, is paying your bills on time. Putting good processes in place to manage your finances will help you keep on track and avoid unnecessary interest charges, penalties and fines.
If you need information and/or advice about putting good procedures in place, contact our team for assistance. Email us at email@example.com or ring our office on 01 905 9436.