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Crossing borders can raise problems

PKF-FPM Tax Corner

QUESTION: I live in Dublin and recently started a small business which will operate both in the south of Ireland and also in Northern Ireland.

I have appointed a manager in Northern Ireland to run the NI part of the business for me. In which jurisdiction should I be submitting a tax return and where do I pay my tax?

ANSWER: As you live in the south you will be deemed resident in Ireland for tax purposes and as such will be liable to tax in Ireland on your worldwide income. This means that you will pay Irish tax on any income earned from both your NI and Irish trades. The tax you pay will be based on the profits of the businesses once the accounts for each business are prepared in accordance with NI and Irish requirements.

You will be required to complete an income tax return in Ireland.

This should be prepared on a calendar year basis from January1 to December 31. Any tax payable is due by October 31 following the end of any given calendar year. The tax return is prepared on a self assessment basis and any other income you have such as P60 income, rental income, deposit interest, foreign income or dividend income should also be declared on this return.

Because you also carry on your business in NI you will be charged to tax on your NI business profits under UK tax legislation. You will be entitled to claim the full UK personal allowances. Tax in the UK is payable on January 31 following the end of the tax year.

In working out your Irish tax liability you will be entitled to tax relief for any tax suffered in the UK on your NI trade. This is known as double taxation relief and is given under the rules of the double taxation treaty which exists between the UK and Ireland. You may also need to recalculate your UK taxable profits in accordance with Irish taxation rules to determine the appropriate tax relief available.

Carrying out two trades in two tax jurisdictions is a difficult predicament for any businesses not only from a tax and VAT perspective but also from a commercial and administrative perspective and specialist advice should be taken.

* Paddy Harty (p.harty@pkffpm.com) is director at PKF-FPM Accountants (www.pkffpm.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.