Last week we spoke about losses in your company. We looked at how you can use those losses and how to maximise their value to benefit your business. If you missed it read here
This week we are going to look at the value of good compliance in your business. In our view, it has never been so valuable. We have seen the benefit of this in recent weeks among our clients. It puts more money in your pocket. Sometimes it's a service that is not seen as valuable by clients. There can be an attitude of "sure anyone can do that" My sister who is a trained nurse is looking after the books for me!! When I hear this, it is an automatic red flag. Why would you do that to your sister? And why would you put the future of your business in the hands of someone that has no clue whatsoever about this? The poor girl doesn't have experience in payroll, Vat, accounting software, tax deadlines. You must not like the girl to do that to her. You also aren't taking your business seriously. You need to invest time and money in getting the right financial systems in place for your business. Good compliance will flow from this. So will tax clearance. Why is this so important?
The most valuable piece of advice I got this year was from Ger, my business partner. We closed our office in March, and all started working from home. Most businesses in the country were closing and there wasn't a sinner in our local town in Tramore. It was a time of huge uncertainty for our client’s businesses and ours too. Ger's advice was to get our personal finances sorted first so that will then be able to focus on the business. That gave me the spur to act to look at my finances and reduce costs where I could. I knew we would take less money from the business as there would be less money available. This gave us the headspace to make the business decisions that were necessary after that. You worry if you miss tax deadlines, have tax debts, and don't have tax clearance. This causes stress and saps your energy. This affects your ability and energy levels to drive your business forward. Good compliance gives you the headspace to focus on your business.
I put a post on linked-in earlier in the week about the warehousing of Revenue tax debt. Revenue has extended the deadline for this to the end of October. We did a blog on this a few weeks ago - read here. This is an opportunity to get your tax affairs in order so don't miss it. Why is it an opportunity for you? Two words - Tax Clearance. If you have tax clearance you have got your tax affairs in order. You have tackled the issue of outstanding tax returns and put a plan in place to pay tax debts over time. You have boxed off a problem on the one hand and have created an opportunity on the other. Tax clearance is the most basic need for any business that is looking to grow. When thinking about this last night I was trying to think about what you need it for. The following came to mind
- Employee Wage Subsidy Scheme [EWSS] - read here
- Stay and Spend Tax scheme for the hospitality sector - click here
- Restart Grants see here
- HAP scheme for landlords
- Tax refunds
- SBCI Loans - read here
In the last 2 weeks, we did an EWSS sweepback and processed the September payroll for a client on this scheme. This was worth close to €16,000 to that client. If the client didn't have tax clearance, they couldn't have availed of the scheme and would be down €16,000. They would also be down about €12,000 per month for the next 6 months. Many businesses are due money back from Revenue which Revenue will hold onto. The business may not owe Revenue any money but could have some returns outstanding. Typical returns could be a Vat return of trading details or a Form 46G. This is crazy and can cause problems in that
- you could be incurring unnecessary costs like overdraft interest and bank charges
- you may not have enough funds to meet your payroll costs causing friction with employees
- you may not have enough funds in the business to pay your salary or drawings
- you may have to introduce funds into the business from personal savings to pay costs
- For a company to get tax clearance the owner directors also need to be tax compliant
Being late costs you money
The tax system favours those businesses and individuals that are tax compliant. In the tax code, there are sections on interest, penalties, and surcharges. There are other ways to penalise taxpayers around the use of losses and claiming back taxes. And that's only Revenue. There are also late filing fees and a possible loss of Audit exemption with the CRO. Some of the Revenue tools include;
- 5% or 10% surcharge for late filing of Income Tax and Corporation Tax returns
- penal interest rates of up to 10% per annum for late payment of Vat & PAYE and 8% for Income & Corporation Tax
- limiting the offset of losses in the current or previous year for companies by 25% or 50%
- Can only go back 4 years when claiming tax refunds from Revenue
- Set penalties in Revenue Audit cases plus Interest
As a business owner, you have a decision to make. Am I happy to pay extra tax to Revenue? And interest and penalties on top of that or do I want to invest my money to get a good compliance system in place. Invest in this and you will save money and give yourself the headspace. The finances will be under control and you will be able to get on doing what you do best. Growing your business to help give you the lifestyle that you want.
Choose your accountant well
Do you choose your accountant based on price only? If your needs are very basic that can be ok. If not, that is the wrong approach. You need to choose based on value. What value can this accountancy firm bring to my business? Does this accountancy firm understand my business? Will this firm help me to keep tax compliant so that I will have tax clearance? Will they help me to grow my business? Can they give me all the services that I need and want? Have they got tax specialists that can make sure I am paying what I owe to Revenue, but no more? Will they be able to help me sell or pass on my business to the next generation and extract value from the business? There are many other factors too. Saving a couple of hundred euros a month could cost you thousands in the longer term. Invest wisely and invest well, so that there is more cash for you. More cash to hire the VW camper van and go on tour!
If your accountant is getting all your returns in on time and your taxes are all up to date that is a valuable service. If not, then you can stay in the doldrums and you will continue to be late and have the usual Revenue headaches. "The definition of insanity is doing the same thing over and over again and expecting a different result". Don’t go insane. Get the right fit for you and your business.
Do you need help in this area? If so, call Deirdre and she will point you in the right direction. Or send us a mail click here