25 Merrion Square,
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DLS Partners Tax and Accountancy Services
Q. What areas / sectors do you specialise in?
A. We specialise in the areas of personal tax and in helping people to set up their own businesses. Personal tax is a very wide ranging area and covers everything from filing tax returns for people who want to reclaim medical expenses to advising people who have received an inheritance as to what the tax implications of that inheritance are.
Q. How did you get into this area?
A. I have always had an interest in people who are starting their own businesses. I think it?s their enthusiasm that?s the key for me. There is also a huge amount of job satisfaction in helping someone to set up the accounts and tax aspect of their business correctly from the beginning. I am a great believer in if you set it up right at the start, it?s much harder to go wrong along the way.
Q. What questions do get asked most often?
A. The question I get asked most often is "Should I operate my business through a company or as a sole trader?" This is a key decision for someone starting a business and it is not a simple yes or no answer. For a lot of people the choice between operating as a sole trader and forming a limited company through which to operate their business can be very confusing. There are a couple of key considerations which need to be considered before deciding to go one way or the other.
Q. How important is "Limited Liability" for a business?
A. These are two very important questions because they highlight two of the main benefits of running your business through a limited company. If there are surplus profits in your company that you do not need to fund your lifestyle then it is possible to put that money to a tax efficient use by putting a company pension scheme in place and having the company make contributions to that scheme on your behalf. Such contributions are a tax deductible expense for the company and so are effectively tax free.
For some businesses, the benefits of Limited Liability are crucial and this on its own may be enough to warrant the running of their business through a limited company from day one.
If your business is unlikely to generate surplus profits for the first few years then maybe you should give consideration to starting your business as a sole trader with the objective of incorporating further down the line. This has the benefit of postponing the costs associated with incorporation until your business is established.
Any losses that you incur as a sole trader during the first few years should be used in full against future profits before incorporating the business to ensure that you benefit in full from the losses you incurred.
Q. How important is it to keep proper accounts? What are the consequences of a business not having proper accounts in order?
A. I know most people reading this will say; well she would say that, but it really is vital that you keep proper accounts from day one. This doesn?t mean that you need an accounting package with all the bells and whistles, it simply means that at the very least you should have a separate business bank account and you should be keeping track on a spreadsheet of the lodgements to that account (i.e. which invoices that you have received payment for are included in each lodgement) and the payments out of that account (i.e. details of what cheques/direct debits/transfers were paid and what they were for).
It is also very important that you keep a file of all of your purchase invoices and if you are registered for VAT you should also keep these on a spreadsheet so that you can easily work out what VAT on purchases you are entitled to reclaim from the Revenue when filing your VAT return.
The main consequences of not keeping proper accounts mainly concern the bank and the Revenue Commissioners. If your business is in a growth phase then it is likely you will come to the point where you need some form of bank financing such as an overdraft or loan. The criteria for such finance facilities have really tightened up in the past few years and the bank will want to examine the accounts you have to give them an idea of how you are running your business. Unfortunately, inaccurate accounts will usually cause your application to stumble at the first hurdle and that could have a serious impact on your business.
The Revenue also have an interest in checking that you are accounting for VAT and payroll taxes correctly and will often carry out audits on relatively new businesses. The main issue with Revenue discovering an underpayment of tax is the interest and penalties that are applied in addition to having to pay over the actual amount of tax due. The Revenue interest rates are applied daily and are calculated at rates upwards of 8% depending on the tax involved. The penalties also vary depending on a number of factors but are a minimum of 10% in situations where a penalty is deemed to apply. It is not uncommon to find that the amount of interest and penalties payable are actually higher than the tax amount where the tax underpayment occurred a number of years ago.
Q. It is often said, a good accountant will save you money?
A. A good accountant will definitely save you money. Whether you are operating through a company or as a sole trader, a good accountant will be able to review your accounting records and recommend some relatively basic things that should save you tax and/or make your business run more efficiently. See below for my top five tips for business owners to see the kind of things I mean
Q. What are some of the misconceptions of the accountancy profession? Why don?t some people like their accountant?
A. The most common misconception I come across is that you can?t ask your accountant a question. I always get very frustrated when clients move to DLS from other accountants and say things like "Well the old accountant never explained the figures to me, they just got me to sign the accounts every year." I really believe it is so important for all business owners to understand how the figures in their accounts are arrived at. If people don?t know what?s included in the figures they?re signing, how are they meant to be able to agree that the accounts are correct and sign them accordingly? It is our policy to go through all of the figures in clients accounts with them and our clients are encouraged to ask as many questions as they like ? there is no such thing as a stupid question when it comes to your business?s accounts.
Q. Do you do more than just accounts? Do you offer financial advice etc?
A. DLS is a bit of a one stop shop for people and I think that?s one of the things that really appeals to clients about us. We offer financial advice through our regulated entity, DLS Capital Management Ltd. as well as all of the accountancy and taxation services we offer through DLS Partners
Q. What interesting cases have you worked on?
A. I work on a huge variety of cases and they are all interesting in different ways. I recently had a client who started their business in a bedroom at home and within two years had built up and sold on their company. It is very heartening for me to see that things like that are still happening in a recession.
I also work with a lot of medical consultants and there have been a lot of developments recently concerning their continuing to work as sole traders or starting to carry on their businesses through companies. This is a very challenging and constantly changing area and keeps us on our toes balancing the requirements of the insurance companies and Revenue.
Q. What advice would you give to somebody looking for an accountant for first time or looking to change accountant?
A. I would say go and visit a few accountants and get a feel for what they are like to interact with. Someone once said to me when I was going for job interviews as a trainee accountant that I should take the job in the office in which I had felt most at ease in the interview. I think it?s the same with choosing an accountant. Ideally you want someone who will be with you through the years as your business grows and whose advice you trust. Unfortunately, as with everything else, it doesn?t always work out that way so it?s equally important to cut your losses and change accountant if you?re unhappy with your current accountant. Most accountants including ourselves do not charge for an initial consultation so it shouldn?t be a costly exercise to visit a few.
Q. What gives you the greatest satisfaction in this job?
A. Like every job, the greatest satisfaction comes from seeing things you have worked on go well. For me that is often seeing a business I have been with from the beginning land a big contract or it could also be getting the Revenue letter stating that a clients Revenue audit has concluded successfully ? clients love getting those letters, they get a much better reception than the letter stating the client has been selected for audit in the first place!
Q. What would be the top 5 tips you would give to business owners?
A. 1. Open a dedicated business bank account and get a business credit card if possible
By having a dedicated business bank account you'll make your own life a lot easier as all business income and most business expenses will now be in the one place and your own personal finances will be kept separately. If you are planning on doing your own taxes this will greatly ease the headache of preparing your own tax return and if you are going to use an accountant, having your business affairs organised in this way should result in significantly lower fees.
A business credit card is also a great idea and should be used instead of cash for all business expenses where possible. Not only does this help to centralise your business expenses but it helps to ensure you get a tax deduction for everything you pay for. It's important to keep the actual receipts for the items you pay for and these should be stapled to the credit card statement for when you need to prepare your accounts.
2. If you're registering for VAT consider whether or not you qualify for the Cash Receipts basis.
Normally people and companies registering for VAT do so on an invoice basis and this essentially means that the VAT is due to Revenue for the VAT period in which the invoice is dated regardless of whether or not you have actually been paid for that invoice. This can cause big cashflow problems as you can be expected to pay VAT over to Revenue that you haven't yet received.
The alternative is the cash receipts basis on which you pay VAT over to Revenue in the period in which you received payment of the invoice, regardless of when the invoice was issued. This is obviously a lot more beneficial to small businesses as Revenue only get the VAT when you have been paid.
The current annual turnover limit for the cash receipts basis is ?635,000 and it is also available to businesses where over 90% of their turnover is from unregistered entities.
3. Learn to use the Revenue Online Service (ROS) and get your book keeping in order from the start
When you start your business your first focus, and rightly so, is generating income. However, you'll probably end up costing yourself a lot of money in the long run if you don't keep up with your book keeping on a regular basis. You can do as much or as little as you want to yourself and you can involve an accountant to do anything you're not comfortable with. Most accountants are willing to be available at the end of a phone if you run into any difficulties.
Also, the Revenue Online Service (ROS) is excellent and very user friendly. You should register on www.ros.ie and this will give you access to all details of your taxes including what payments you've made, what returns are due and when. You can also file a lot of your returns and make tax payments online using ROS and this should make the whole process a lot easier.
4. Never attend a Revenue audit without an accountant to represent you.
I have never been in the business of Revenue bashing and I won't start now but all I can say to get this point over to you is that if I was selected for a Revenue audit in the morning, I would get a different accountant to attend the audit with me. Revenue audits can be quite straight forward or they can go horribly wrong and a lot depends on the documentation you present to the auditor at the beginning. Accountants are well practiced at preparing these kinds of files and in my opinion it is time and money well spent. Having your business audited by Revenue can also be a very emotional experience as it?s your business being examined and having an accountant attend the audit with you provides an often needed buffer between you and the Revenue official which can only benefit the whole process for everyone.
5. Think seriously about an planning an exit strategy from your business
Like most things tax related, a bit of forward planning goes a long way! There are a number of key reliefs that can be used both to benefit you as the business owner who is retiring and to benefit the people you plan on handing your business over to. These include things like retirement relief and business assets relief. All of these reliefs come with conditions that have to be satisfied and there is nothing worse when planning an exit strategy that leaving it that little bit too late and thinking I wish I had thought of this a bit earlier.
In general and as an aside, the same thing applies to all inheritance tax planning ? forward thinking is the key! Now that the tax free thresholds have been severely diminished in recent budgets there is huge scope for tax savings on inheritance tax liabilities if you?re willing to plan ahead.