Revenue have issued a note intimidating that under payments of preliminary tax (PT)for 2010, could result in an interest charge when you finalise your income tax liability for that year.

I will try to explain this in a simple example.

Say you pay PT of €500 for the year 2010 in this years submission.

Next year, when you finalise your accounts for the year 2010 you realise your tax bill is actually going to be €1,500. This means at 31st Oct 2010 you should have paid an extra €1,000.

The penalty for doing this will be an interest charge from the original deadline to the point at when you pay your tax bill (0.0273% per day).

On top of this, you have the extra €1,000 tax you underpaid.

I realise times are tough at the moment and most small businesses really struggle with cash flow so it is hard to pay both PT and the IT bill in one go come October 31st. Ease the pain by having a direct debit set up to pay the PT in installments, or at worst get your accounts for 2010 done as early as possible in 2011 so you minimise any potential interest charge you may be hit with.

Contact us for more information or if you want your accounts prepared swiftly.