Self assessment: Five triggers to be aware of that mean you have to file a tax return to the Revenue
Published 24/10/2015 | 02:30
Around this time of the year, the Revenue Commissioners usually run a major campaign to remind self-assessed taxpayers to file tax returns.
Most wage earners in this country pay their tax under PAYE. While employees have their employers to work out the amounts and collect the tax due every week and month, the self-employed are categorised as self-assessed because they must work out and pay their own tax.
If you fall into this self-assessment category, the law says you must submit returns around October time.
Even if you are a PAYE worker, you can still be categorised as self-assessed and have to submit a return. It's not only about the self-employed. Revenue will treat you as self-assessed and require you to submit a return of income if you meet any of these conditions:
You have fees or other earnings outside your PAYE wages greater than €3,174.
If in your spare time you do work of any description and get paid for it, you must let Revenue know. But if the total taxable earnings are greater than €3,174, Revenue will regard you as a self-employed person and you have to submit a return under the self-assessment rules. The €3,174 limit will be changed to €5,000 next year.
You have gross income (before any allowances and deductions) greater than €50,000.
The key here is the word 'gross'. You mightn't be actually making any money from rental property or some other venture, but if the total amount received before your own costs, deductions and tax allowances is more than €50,000, you will be treated as self-assessed. The €50,000 limit is to change to €30,000 next year.
You own shares in a company in which you are a director.
Even if you don't earn any director's fees, the mere fact of being a company director with a shareholding of 15pc or more puts you into the self-assessment bracket.
You have exercised share options.
Share options are a form of remuneration which links the amount an employee can receive to the share value of their employer company. You'll know if you have benefited from share options, but don't forget that if you did you will be treated as a self-assessed taxpayer.
You opened a foreign bank account or have other types of foreign investment.
Opening a foreign bank account is, of course, perfectly legitimate, but several Revenue investigations in the past have focused on the use of foreign bank accounts to conceal untaxed money.
As a consequence, Revenue now insists on a return of income from anyone who has opened a foreign bank account.
Revenue ask for a return.
It may seem obvious, but don't overlook any correspondence from Revenue which might request that you provide them with a Return of Income. Irrespective of employment status, they are entitled to ask any taxpayer for a return.
There are other situations which can make you a self-assessed person for tax purposes, but these are the main ones.
It's not a trivial obligation and you can be charged penalties and interest for failing to submit a return or submitting an incorrect return.
So if, in particular, you have income from any source other than wages under PAYE, it's a good idea to check out if Revenue are going to treat you as self-assessed.
Brian Keegan is director of taxation with Chartered Accountants Ireland.