I was having a chat with a client the other day and he said ‘It’s the most stressful week of the year. You get all the receipts together, turn them into something resembling sense – or worse, pay someone to do it for you. Then you send the results to the accountant and wait. A couple of days later the phone rings and the accountant tells you how much you have to pay the taxman.’ ‘A cruel and unusual form of torture’ I said. ‘I’m not sure which is worse,’ he answered, ‘the news from the accountant or waiting for the phone to ring. I feel like a condemned man. I’m not sure that I understand preliminary tax either’ He said So I had a go at explaining. ‘Let’s say you start business in July 08. So you have to do a tax return for 2008 (that was due in October 2009) and pay any tax for 2008 with that return. OK? In October 2009 10/12ths of the year has gone by so the taxman says give me most of what you will owe me for 2009 now. That’s preliminary tax. You do the return for 2009 in October 2010 and pay anything extra that’s due for 2009 at that time. Plus the taxman wants most of what you owe (preliminary tax again) for 2010 and so on year after year’

‘But it doesn’t have to be all in one go’. ‘What do you mean’? he said. ‘Have you ever read the back of the demand for preliminary tax that you get each September?’ I asked. ‘No’, he said. ‘Well, on the 5th line on the back of mine I noticed a piece in very small print. It said that you can pay your preliminary tax by direct debit over 10 months’ ‘So you are telling me that instead of having to find 3,000 or 4,000 in October I can pay 400 a month?’ He interrupted. ‘Absolutely’ I said. ‘The Revenue is no different to any business they’ll take payment any way they can get it’. ‘Besides, they want to manage cash flow the same as we do’.

As you can imagine, my client was a lot happier after that. When I was asked to write this article I thought about how we might take the stress out of tax-return time and, I came up with 7 steps to an easy week at the end of each October. You can implement them in your business easily.

1. Do the accounts weekly or monthly (It will improve your profits too)

2. Do your medical receipts in January – Spend medical expenses before the end of the calendar year

3. Make sure you have collected all the receipts and that you have organised them in date order. Get a child to do this for you. They don’t mind doing that work for a small fee

4. Pay the Preliminary Tax by Direct Debit Monthly

5. Make sure that you are making use of all the reliefs available

• Employ family members to minimise tax exposure

• Claim all allowable expenses through the business

• Is your business ready (big enough) to move to company status and claim tax relief for new companies? –turnover of about 200,000 makes this worthwhile.

6. The Form 11 (tax return form) goes out to you in March. DEAL WITH IT THEN, because there is no reason to wait till the last minute and…

• The taxman will do the tax calculation for you

• If there is any refund you will get it immediately (not in October)

• You can adjust the direct debit if you need to

• The taxman very rarely audits the early returns. They save that for the late ones

7. Get a tax clearance certificate. The Revenue then knows you are compliant and will generally just leave you be

And the bonus: When you hear the ads on the radio in mid September you have NO worries and NO pressure because you have it all done.

Peter Cronin is a coach, business mentor and trainer. Peter accepts e mail queries on peter@alaymont.com