A Useful Guide to Setting up a Tax Practice

Transcription

1 A Useful Gude to Settng up a Tax Practce

2 Irsh Taxaton Insttute. Whle eery effort s made to ensure that the nformaton outlned n ths leaflet s accurate, the Irsh Taxaton Insttute can accept no responsblty for loss or dstress occasoned to any person actng or refranng from actng as a result of ths materal. Where approprate, professonal adce should be sought. The nformaton n ths leaflet s subject to change. Dsclamer No responsblty for loss occasoned to any persons actng or refranng from acton as a result of any materal contaned n ths helpsheet can be accepted by ether the authors or the Irsh Taxaton Insttute

3 3 Who s ths help sheet for? Ths help-sheet s releant for all members prodng tax serces through ther own tax practce. It s partcularly releant to members consderng startng up n practce but should also prode useful nformaton and tps for those who hae been operatng n practce for some tme. The man areas coered are: Takng the decson Intal steps to set up Preparng a busness plan and budgets Legal structure Taxes regstraton Ant-Money Launderng (AML) Offce premses IT systems Insurance Brandng Gettng clents Tax techncal support It prodes gudance on sources of further nformaton and some suggested serce proders that ITI hae worked wth. Howeer, members are always recommended to carry out ther own research nto supplers of serces for the soluton whch best fts ther needs and ther budget.

4 4 1. Takng the decson to practse on your own Makng a decson to set up your own practce may be ery dauntng but t should also be a really exctng and challengng tme. In reachng your decson, some useful questons to ask yourself mght nclude: Are you fully commtted to ownng your own practce or n lght of the current economc downturn s ths dea a stop gap measure untl somethng better comes along? Are you comfortable wth the realty of not hang job securty? Hae you suffcent resources to te you oer untl ncome s generated by the busness? Wll you mss the benefts of beng an employee.e., more fxed workng hours, ablty to take holdays when t suts and the legal benefts of beng an employee? Hae you enough dre and ambton to deal wth the unexpected and the professonal and fnancal rsks assocated wth ownng your own practce? Hae you moral support from famly and frends to get you through the challenges ahead? Ask yourself the hard queston are you really up to the challenge? Naturally you must hae confdence n your own abltes and enjoy sellng tax serces to prospecte clents. Inherently, you must be an entrepreneur of sorts and enjoy the challenges t offers. 2. Intal steps to set up In explorng the possblty of startng your own busness, the followng ntal steps may be worth consderng: Speak to others who hae taken smlar steps Establsh your serce offerng and the lkely market for same try to pn pont two or three key areas rather than prepare a long lst of specalsatons Identfy the market for ths serce offerng and the lkely clent base Identfy compettors n ths space and try to dstngush your serce offerng from thers Decde on your charge out rates and compare these to your compettors Identfy your lkely start up costs and the perod of tme before you wll achee a break een poston 3. Preparng a busness plan and budgets If you requre bank fnance, eery fnancal nsttuton wll requre you to prepare a busness plan outlnng the nature of the busness, the target market, the leel of fnancng needed and A Useful Gude to Settng up a Tax Practce

5 5 the proft projectons for years one to three. In preparng pro forma proft and loss accounts, balance sheets and cash statements, take a prudent approach and do not oerstate ncome or understate costs - try to be as conserate as possble. The fnancal data requred to deelop your busness plan wll nclude the followng: Expected annual turnoer. Lkely costs, ncludng start-up costs. The expected cash flows arsng from 1 and 2 aboe wll generate a cash flow statement. As cash s lkely to be lmted n start-up operatons, credt control s key to generatng tmely cash flows. If you operate ntally wthout support staff or employees there s a celng to the amount of fees that you can generate. To ncrease these fee leels t may be necessary to hre a secretary ntally. Thereafter, further growth s acheed by hrng addtonal staff at the approprate leels. If and when you come to recrut staff, you need to be mndful of employment law and health and safety ssues. Vst for helpful nformaton on these and other employer support ssues. If your exstng arrangement s to work from home or use a shared offce at the outset, you may decde to lease an offce as fee leels ncrease. You should factor nto your cash flow projectons delays n collectng cash as strans on workng captal wll nhbt future growth. You should ensure that drawngs/salary do not exceed aalable cash flow. Sole traders/partnershps should be dscplned enough to put cash asde on a monthly bass for ther prelmnary tax oblgatons. Assumng you operate ntally on a VAT cash recepts bass, then once cash s receed the VAT element of the fees collected should be lodged to a separate bank account. 4. Legal structure The choces aalable n decdng the legal form of your busness are: Operate as a sole trader Set up as a partnershp wth another person where both partners work together and splt the proft / losses accordng to ther proft sharng ratos Incorporate a lmted lablty company that wll hae a legal dentty separate to ts shareholders and drectors. It s possble to change the legal form of the busness later on but such changes may be dsrupte and expense to mplement and may also hae some tax costs.

6 6 Sole Trader There are no legal formaltes noled n operatng as a sole trader and you wll be regarded as a self-employed nddual. Further, there are no publc dsclosure requrements n respect of the busness. You wll, howeer, be personally exposed for any losses ncurred by the busness. Partnershp Where two or more self-employed persons set up a partnershp, t s adsable to draft a formal partnershp agreement whch would nclude detals of captal to be proded by each partner, proft sharng ratos, steps to be taken on the ntroducton of new partners or retrement on exstng partners, otng rghts of the partners, an outlne of how the busness s to be run etc. Each partner of the busness s personally lable for the losses of the partnershp een f these are caused by other partners. Lmted Lablty Company The man adantage of ncorporaton s that of lmted lablty equal to the amount subscrbed for n respect of the shares. The formaton of a company wll requre you to choose a company name, draft approprate Memorandum and Artcles of Assocaton, fle the approprate documents wth Companes Regstraton Offce. If you are gong nto practce wth one or more persons and you decde to ncorporate, t s adsable to draft a shareholders agreement whch should coer some or all of the followng matters: The amount to be subscrbed for shares or the leel of shareholder loans Drectors fees and salares Votng rghts Pre-empton rghts n respect of shares should a shareholder decde to ext Steps to be taken on the ntroducton of new shareholders The dson of responsbltes between drectors Hang a lmted lablty company may prode some plannng opportuntes e.g. personal penson plannng but the applcaton of the close company surcharge to serce companes may ncrease the effecte rate of corporaton tax. Remuneraton wll manly be n the form of salary on whch PAYE / PRSI should be operated at the tme of payment. Ths should remoe the pressure of hang to put asde mones to fund prelmnary tax oblgatons n October / Noember of each year. The dsadantages of ncorporaton nclude: Some set up costs wll be ncurred There are annual flng requrements wth the CRO, e.g. Form B1 A Useful Gude to Settng up a Tax Practce

7 7 An annual audt wll be necessary f turnoer s greater than 7.3 mllon or the balance sheet s more than 3.65 mllon or the number of employees s greater than 50. If you requre assstance wth the regstraton process and/or company secretaral matters, you mght consder usng a professonal serces frm or a company formaton agent. Further nformaton as to the CRO oblgatons for small companes can be found at The Insttute of Chartered Secretares and Admnstrators, whle based n the UK, prodes a wealth of nformaton on regulatory bodes and corporate goernance worldwde 5. Taxes regstraton If you employ ndduals n the busness or act as a drector n a company, t wll be necessary to regster for PAYE / PRSI. Where turnoer exceeds 37,500 VAT regstraton s oblgatory. In the context of VAT, consderaton should be gen to aalng of the cash recepts bass of accountng. One can apply for the cash recepts bass at the tme of regstraton by tckng the approprate box on the taxes regstraton form. The cash recepts bass s aalable to: VAT regstered persons whose supply of goods and serces are almost exclusely made to unregstered persons or persons not enttled to a full deducton of VAT or VAT regstered persons whose turnoer does not exceed 1 mllon A Form TR1 (sole traders, partnershps) or TR2 (lmted companes) must be completed to ge effect to taxes regstraton. 6. Ant-Money Launderng (AML) Tax adsors hae legal oblgatons n relaton to combatng money launderng. New AML legslaton s due to be enacted n md-late 2009 whch wll amend the current oblgatons on adsors and further gudance wll be proded to members by ITI once ths legslaton s n place. In the meantme, anyone settng up n practce needs to reacquant themseles wth current ITI gudance on the matter ITI gude to Money Launderng 2004.

8 8 7. Offce premses In the current economc enronment where supply of offce space exceeds demand, arous optons are open to start-ups to serce ther offce needs. For those who do not want to work from home, companes that offer flexble offce solutons a busness centres for small busnesses should be consdered. Such busness centres are flexble and can prode addtonal offce space as the busness grows. They also prode shared serces and you can pay for support serces and meetng rooms on a pay per usage bass. A rtual offce soluton s proded by many busness centres whereby you wll be proded wth a busness address, personalsed call answerng, mal collecton and forwardng. Ths serce offerng s compettely prced thus reducng the start-up costs for small busnesses. 8. IT systems You wll hae to consder the nature of the offce equpment that you requre and the method of fundng the purchases of same. Some IT requrements to be consdered nclude the followng: Computer software and the nature of the e-mal system that s requred Computer hardware e.g. a laptop and prnter, fax, scanner The ablty to access e-mal remotely Frequent back-up of the hard dre Ant-rus software Techncal support to resole IT ssues 9. Insurance The man category of nsurance under ths headng s professonal ndemnty nsurance whereby protecton s aalable aganst your legal exposure for losses suffered by your clents as a result of neglgent adce. Brokers wll ask a number of questons n determnng the cost of professonal ndemnty and some of these questons may nclude: The number of years experence that you hae The lkely fees to be generated n year one The percentage splt of fees between tax consultancy, tax complance and mergers, acqustons and dsposals etc. Whether you wll be authorsed to prode nestment or fnancal serces adce Whether you wll subcontract work and f contractors wll hae ther own nsurance What form of contract wll you use wth clents What lmts of ndemnty are requred and the excess that you are prepared to carry Dependng on your crcumstances, other nsurance coer that may be requred mght nclude: A Useful Gude to Settng up a Tax Practce

9 9 Employer lablty nsurance Publc lablty nsurance Property and contents nsurance Keyman nsurance Income protecton Drectors and offcers nsurance ITI has agreed terms wth one Insurance proder ERM Fnancal Serces, 7 St. James Terrace, Malahde, Co. Dubln, tel: Howeer, anyone establshng themseles n practce should check alternate supplers for the most sutable arrangements and prces. 10. Brandng In deelopng your brand there are a number of ntal steps that must be taken and these nclude: Tradng name Key to your brandng strategy s the tradng name that you wll decde to use. Ths may nclude your own name, or be a generc busness name. As part of your brandng strategy, you should add the Irsh Taxaton Insttute s Regstered Tax Consultant logo to your brand and sgn up and regster as a member frm of the Insttute. Ths brand name of Regstered Tax Consultant prodes members wth a defnte professonal dentty under whch to market and offer ther sklls and serces. The Regstered Tax Consultant brand also allows the Irsh Taxaton Insttute to promote the alue added by, and qualty assurance aspects of, the professon to the busness communty and general publc. Key Steps to downloadng and usng the logo: Log onto Clck on the members area of the webste and enter your emal and password. Select AITI Regstered Tax Consultant logo opton. Reew the rules and regulatons goernng the use of both Regstered Tax Consultant and Regstered Tax Consultants logos. Download the logo(s) that you wsh to use along wth the brand gudelnes that descrbes how these should be ncorporated nto letterhead or promotonal materal. Graphc desgn Ths wll dre your brandng strategy and f successful wll play an mportant part n your clents dstngushng you amongst your compettors. It wll also dre the look of the busness and the statonery that you wll use. It s mportant that you regster your company and/ or busness name before desgnng your statonery and busness cards. If you ncorporate

10 10 ensure that your statonery outlnes the busness name plus the word Lmted. Also ensure that the regstered offce, busness address, name of drectors, VAT regstraton number etc. are ncluded as approprate. Webste desgn and deelopment There are many web deelopers who can deelop a personalsed webste sutable to your busness needs. Webste hostng Ths can be proded by a dedcated web hostng proder who wll prode storage space and techncal support to host the webste. Doman regstraton If you decde to hae a web ste you should regster a doman name. Ths s nexpense and can be completed ery quckly. The doman name s a label that s used to dentfy your specfc webste. Agan you mght fnd the webste helpful. It s the Irsh doman regstry webste lstng all.e regstered nternet names. 11. Gettng clents In growng your clent base some tps to bear n mnd nclude the followng: Fnd out what your prospecte clent serce requrements are Identfy the correct person to speak to and determne f that person s the decson maker Communcate why your serce offerng can meet your clent s needs If your clent wants to proceed and recee adce, agree a fee n adance of commencng any work. Whle you may be nclned to take on low qualty and unproftable work ntally to generate fees, ths wll dstract you and waste tme that should be spent on deelopng and sellng the serces that wll be proftable. You should contnuously assess your clent base and be prepared to reassess clents who do not generate good recoeres. Remember the 80:20 rule.e., 80% of your ncome s generated by 20% of your clents. You should agree fees n adance to aod surprses and subsequent wrte off s. The ultmate goal of marketng s to adse your target customers of the exstence of your busness and what serces you are offerng. Before undertakng a marketng programme t would be helpful to consder who your target market s and what aspects of your serce A Useful Gude to Settng up a Tax Practce

11 11 offerng you want to create an awareness of. Whateer medum s used to adertse your busness, consderaton should be gen to the market penetraton and readershp profle that s lkely to be acheed. Other tps for growng a clent base:»» Get noled wth the local Chamber of Commerce. Ths wll prode excellent networkng opportuntes and potental clents for your new frm.»» Target local meda for press coerage. Most local papers wll nclude edtoral f you adertse. Howeer, t may lead to an opportunty to prode expert adce or commentary on a regular bass. Ths wll help to rase your profle. 12. Tax Techncal Support It s mportant that you hae access to the most up-to-date techncal support that may be proded by the Irsh Taxaton Insttute ncludng: TaxFnd TaxFax Insttute publcatons Attendances at conferences and tranng semnars attendance at such eents should also prode opportuntes to network wth other peers If you were seekng to offer a unque serce, offerng some profle buldng measures mght nclude speakng at Insttute semnars or wrtng an artcle for the Irsh Tax Reew. ITI members settng up themseles n practces should also ensure they are famlar wth our Code of Practce gudelnes whch are aalable on the webste documents/general/code_of_conduct_inside_fnal_2_oct_06.pdf Ths ncludes our polcy on remanng techncally up-to-date through Contnung Professonal Deelopment.

12 Irsh Taxaton Insttute South Block Longboat Quay Grand Canal Harbour Dubln 2 Tel.: Fax: