Way over my head!

trev123

Small bit of Advice needed:

I am a fulltime student and part time worker based in Dublin.
In the summer of 2010 I was a bit bored when college finished for the summer so I set up my own soletrader business.
(Basically all i did was I registered a business name with the CRO to buy my .ie domain and set up a business bank account account under my registered business name with Ulster Bank as i thought this would be good practice)

Over the course of the last month of the summer of 2010 I carried out 3 jobs for 3 business small business clients amounting to a combined turnover of about 900euro. Which I thought was quite good seeing as this was all just for fun. All 3 jobs amounting to 900euro were payed by cheques and lodged into the business account under my business name.

At the time I did not understand what VAT was or that you had to be registered for VAT to charge VAT. So I added VAT to these three sales as I thought that it was a requirement.
When the summer was over I did no more business as my time was taken up wth college. To this day the 900euro which is slowly depreciating with bank charges is sitting in my business account.

I completely forgot about this experimentation of mine until recently when we learned about VAT in college and the fact that you must only charge VAT if you are VAT registered, and that disobeying this carries large fines. I would happily pay this VAT that I had collected (which amounts to only about 150euro but am afraid to approach revenue as I fear I might be prosecuted for charging VAT when not registered.)

Given that this is only a really small sum of VAT collected (150-200euro) and I never actually registered for VAT or tax as this was a part time low turnover job - do you think I can forget about this or should I take action and contact Revenue and try to explain? I am starting to get very concerned that I have got myself into big trouble. (FYI The 900 euro that I generated is still sitting in the business account untouched...)

Would really appreciate some feedback or advice - Am afraid that I am going to have Revenue chasing me and get a bad tax prosecution or a hefty fine.

Mr Clonfadda

my advice would be to contact revenue and explain exactly as you did here. they are generally very reasonable

henryporter

Why not just refund the VAT that you charged?

Marcusm

You didn't meet the turnover thresholds for VAT registration and it seems unlikely that a voluntary registration was appropriate. Rather than contacting Revenue, you would be better off returning the money overcharged to the customers together with an explanatory note. They will likely have (or have attempted) to claim an inappropriate input tax credit which they will correct on their next VAT return. To approach Revenue will only cause more administrative hassles for everyone. Provided you remedy your error, you should not have any problems.

amen

In the summer of 2010

but its now Nov 2011. He should have a made a tax return for the 2010 year which from reading below he hasn't.

So he has undeclared income.

He might want to get this corrected as well/

SeanSouth

No need for blue flashing lights and sirens here. The amounts involved are miniscule and there is clearly no intention to defraud.

Write to the customers involved. Explain to them that you incorrectly charged them for vat and enclose a cheque for the vat portion. Keep copies of everything.

To keep the bookkeeping correct you may need to send credit notes to cancel the original invoices and issue new invoices without vat.

The customer should then make an adjustment for this on their next vat return or make a supplementary vat return for the period in question

Curly Judge

Messing around with Vat is a serious and jailable offence.
However, in your case I doubt they'll be hauling you off to the Joy anytime soon.
In my experience I've found the revenue to be one of the more efficient and reasonable branches of this states administration.
I think you should approach them and make a clean breast of it.
If you don't, but pay back the Vat to the 3 clients, it will cause them lots of paperwork and raise all sorts of hares about a phantom Vat claimer.
Better if you find the Revenue before they find you.
Best of luck with your future entrepreneurial adventures!

Mongarra

From VAT point of view I would concur with SeanSouth.

For Income Tax your first year's trading was 2010 so your return for that year will be due for filing with your 2011 return (if you have any 2011 income) before 31st October next, or usually a 2-week extension if filing online. If using the latter you must register to use the Revenue Online Service (ROS). There is a special 1-year extension for filing when it is your first year.

You should take the VAT exclusive amount (€743 if 21% VAT or €793 if 13.5%) and deduct any expenses relative to the business, not forgetting to claim a reasonable proportion of Wear and Tear on equipment/vehicle (if any) used for the business (called Capital Allowances).

shangri la

Relax, its a non issue. Refund the vat to the companies (just send them a cheque). Revenue won't fine you. Live and learn.

HellFireClub

I wish this was all I had to worry about! OP you can reduce that VAT liability to zero by finding invoices/receipts for your business on the purchasing side, to the value of your sales. I imagine you have a PC/Laptop, phone, web hosting, stationary bills, gather up the VAT on that and offset it against your VAT on sales.

Reduce it as much as you can because any of it that you hand over to Revenue will be wasted on bust banks, overpaid civil servants, people taking the absolute p*ss with taxpayers money, etc...

kranbo

The op was not registered for VAT so I can't see how he can get away with charging VAT and claiming his expenses against same. He should just refund the VAT before revenue cop him