Tax returns for company directors need an extra touch of love and affection. To use a Top Gun analogy, multiple bogeys are heading in your direction. I’ll look at some of these bogeys and other quirks for company directors’ Income Tax returns. By company directors, I am talking about owner directors who own 15% or more of the share capital of a company. These are also known as proprietary directors. Let’s look at
- The surcharge hurts
- Missed BIK
- Salary and Bonus
- Credit for tax paid
- Other areas
- Surcharge again
The surcharge hurts
For company directors, the surcharge hurts. If a company director files their return late, the surcharge is expensive. Way more so than for a non-company director. And the higher the salary the director has, the more it will cost you. I remember having a conversation with a client a few years ago that got him focused.
“James, if we don’t get your tax return filed on time, the 5% surcharge will cost you about €13k”
That call spurred him into action, and we got his Income Tax return information within an hour. Best look at an example to let you know what I’m banging on about!
Example
Hart Robb owns 60% of Robb Ltd, which makes pets clothing. Hart is single for now. Sure, all the ladies are after him, but he’s not a man to be tied down. So he thinks anyway! His salary is €100,000 for 2024. He has already paid PAYE of €27,850. His tax numbers look like this for last year
| Salary | €100,000 |
| First €42,000 x 20% | €8,400 |
| Next €58,000 x 40% | €23,200 |
| Tax liability | €31,600 |
| Less Tax credits | (€3,750) |
| Net Tax liability | €27,850 |
| Less PAYE paid | (€27,850) |
| Balance due | Nil |
Hart’s tax liability is nil. Why would he worry about a 5% or 10% surcharge? If he’s not a company director, he has no worries about being late as 5% or 10% of nil is still nil. But the surcharge for company directors doesn’t work like that. The surcharge applies to the Net Tax liability before PAYE is deducted. For Hart, you’ll see that the number is €27,850. So, if his return is late, his surcharge will be
| Less than 2 months €27,850 x 5% | €1,393 |
| More than 2 months €27,850 x 10% | €2,785 |
Missed BIK
Some company directors will have missed BIK during a tax year. This means they got a benefit from their company that was liable to BIK, but it didn’t go through payroll. It’s not a common issue for our clients, but one of the more common ones is interest on a director’s loan. Less common ones would be medical insurance and company car BIK.
Hart was moving to a more salubrious part of Tramore and was short €50,000 to seal the deal. He took a loan from the company in early January 2024. As the loan was to buy a new home, the BIK rate is 4%. This didn’t go through payroll. As a result, it should be in his 2024 Tax return as BIK income.
| €50,000 x 4% | €2,000 |
In January 2024, the company started paying VHI for Rob and his two sons, Bob and Outforde. The gross premium, before tax relief at source, was €3,000. This was €2,000 for Rob and €500 each for the two lads. Again, this is BIK income that will go into his 2024 tax return and increase his total income liable to BIK to €5,000. I’ll look at this below again in a bit.
Salary and Bonus
Company Directors pay tax on an earnings basis, so salary and bonus for 2024 will be in their 2024 tax return. Even if the bonus was paid in 2025, but it was for 2024, then it will be in the 2024 tax return.
Hart, using Comerford Foley’s super bookkeeping team, gets his year-end accounts in February each year. This is for banks and to decide on bonuses and dividends. In the last few years, he took bonuses as follows
- For 2023, a bonus of €20,000 paid in March 24 and
- For 2024, a bonus of €40,000 paid in March 25.
Income Tax of 40% and USC of 8% were paid on each bonus as follows
| Bonus of €20,000, taxes deducted | €9,600 |
| Bonus of €40,000, taxes deducted | €19,200 |
As such, Hart’s earned income for 2024 was €120,000
| Income for 2024 | €100,000 |
| Less bonus for 2023 | (€20,000) |
| Add bonus for 2024 | €40,000 |
| Total earnings for 2024 | €120,000 |
When you click option B, “Directorship” as the source of earnings, these placeholders will come up for bonuses. Plus, places to enter the tax and USC deducted from that bonus.
Looking at the Income Tax deducted on the €120,000 earned income, Hart’s tax position is
| PAYE paid in 2024 | €27,850 |
| Less Tax on the 2023 bonus | (€8,000) |
| Add tax on 2024 bonus | €16,000 |
| PAYE paid for 2024 | €35,850 |
Credit for Tax Paid
Company directors don’t get a credit for tax paid until after it’s paid. For our clients who took a bonus in 2025 for 2024, we didn’t file the director’s tax return until after the PAYE got paid. Hart got his bonus in March 2025. That bonus was on his payslip for March, but the PAYE wasn’t paid until the 23rd of April. Once we saw the March P30 liability paid in April, we filed his tax return after that.
If we filed his tax return in early April, before the March P30 payment, Revenue could issue his assessment with a €16,000 liability. For ease of understanding the numbers, I haven’t included USC.
This was a big issue with tax-debt warehousing back in the day. Because the PAYE tax debt was warehoused and not paid, the company director didn’t get a credit for the PAYE. The PAYE was deducted from the salary but not paid to Revenue. Our advice, at that time, was to clear the PAYE liabilities in preference to the VAT liabilities.
If some PAYE is paid, then non-proprietary directors and employees get the credit for that before owner directors. This should be less of an issue going forward, given the warehousing scheme is coming to an end.
Other Areas
Other areas to look out for are the
- Earned Income Credit
- Payment
- Other
Earned Income Credit
A company director isn’t entitled to the PAYE credit for their salary. The credit they claim is the Earned Income Credit. The value for 2024 and 2025 is the same for both credits at €1,875 for 2024 and €2,000 for 2025. If the company director has other employment or pension income, they’d get the PAYE credit for that. The reason is that a proprietary director is a self-employed person and not an employee.
We always get a few queries during the year about “how much will you charge me to do a tax return? There’s nothing in it” This is usually someone who rang ten other accountants before the call comes to us. I always think if there’s nothing in it, why don’t you do it yourself? And then I have seen a few ex-client assessments who went the DIY route, and they end up costing themselves a small fortune.
Payment
If funds are tight and you don’t think you’ll have enough money to pay your 2024 tax liability, the 31st of October is your deadline. File your return before that date. The extended deadline of the 19th of November is for those who both pay and file.
Other
There’s a proprietary director box to tick on the personal details section of the return. Also, you need to list the companies that you and your spouse, assuming joint assessment, hold directorships in. Plus, your percentage shareholdings in those companies.
You might think, “Wow, this lad is awful pernickety.” You could be right, but I’m only pointing this stuff out to make sure your tax return is as accurate as possible. And you haven’t left any money on the table with Revenue. The things that people miss out on are easy wins for us, but thousands just aren’t aware of this stuff. And thousands more are scared stiff of Revenue and avoid them like the plague.
Surcharge Again
I’ll look at the surcharge again with Hart’s new numbers for 2024 to include the 2025 bonus, 2024 BIK, and exclude the 2024 one that was for 2023.
| Earnings for 2024 | €125,000 |
| First €42,000 x 20% | €8,400 |
| Balance €83,000 x 40% | €33,200 |
| Tax liability | €41,600 |
| Less Tax credits * | (€4,150) |
| Net Tax liability | €37,450 |
| Less PAYE Paid | (€35,850) |
| Tax Liability | €1,600 |
The reason for the liability is the €5,000 BIK is taxed at 40%. But, he can claim a tax credit of €400 for tax relief at source on the medical insurance. As he paid BIK on the gross premium, he’s allowed a tax credit of €200 and €100 for each of his two sons. That’s the good news.
If he files his tax return late, the surcharge is now on a higher net tax liability.
| Less than 2 months late €37,450 x 5% | €1,873 |
| More than 2 months late €37,450 x 10% | €3,745 |
The key message from this is that tax returns for company directors can’t be late. It’s very useful for them to know their key dates for tax returns. It’s already very late to be getting stuff to your accountants, but act as soon as you can.
Avoid the multiple bogeys and get you and your company sorted. Interested, start here
