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Small Businesses Tax Return Cycle

​The Tax Return and Self-Assessment for Sole-traders and Businessmen

The Self-Assessment requires the sole-trader/ businessmen to file a Tax Return and make their own ‘assessment’ of the income earned through various sources for tax purposes. The CFR will, in the first instance, consider such assessment as correct and may only intervene in cases of arithmetical errors. The CFR may, however, at a later stage verify the declared income through an audit inquiry.

In compiling the tax computation of the Tax Return, the sole-trader/ businessman has the duty and is obliged by law to declare all items of taxable income, allowable deductions, and any tax credits in accordance with the provisions of the Income Tax Acts.

 

Return Attachments

These forms, generally referred to RAs, are attachments to the tax return and are generally used to claim a tax credit or tax deduction. There are a variety of Return Attachments that can be used.

 

Submission of Tax returns for  Individuals carrying on a Trade or Business

The Tax Return is to contain such particulars, statements, accounts, computations or other documents as may be necessary to establish a sole-trader’s/businessmen’s income, whilst also ascertaining allowable deductions and the payable and refundable tax amounts.

If the Tax Return and Self-Assessment Form is not complete in all material aspects in accordance with the provisions of article 10 (ITMA), the CFR will not consider such documentation as having been filed. Tax Returns for sole-traders/businessmen can also be submitted online if one holds an e-ID. Link to online submission

The Tax Return and Self-Assessment is to be signed by the sole-trader or businessman concerned, or by his representative who in turn agrees that s/he accepts and is aware of all matters furnished to the CFR.

If, for some reason or other, the sole-trader/businessman has not been served with a blank tax return Form, s/he is still obliged by law to submit his/her income tax return and self-assessment. If this is not submitted, the CFR will issue a tax statement based on estimated amounts. Once a tax return is issued, the sole-trader/businessman is obliged by law to complete the return and submit it to the CFR.

 

Additional Tax, Penalties and Interests

Failure to compile a correct tax computation will render the sole-trader/small business liable to further tax, additional tax, penalties and interest charges backdated to the relevant tax settlement date.

Additional Tax for Omission of income

If a sole-trader/ businessman fails to declare income  in due time and does it years later, apart from the interest and fines for late filing there is also omission tax. Omission tax is charged on the ‘endangered tax’ resulting from the non-declaration of income.

Interest on Late Payments

If the sole-trader/businessman does not settle the outstanding dues by the tax settlement date, the sole-trader/ businessman starts incurring interest on such unpaid amount at the rate of 0.54% per month up to the date of full payment.

Tax Statement Following a Tax Return and Self-Assessment

Upon completing the Tax Return and Self-Assessment, the taxpayer is to honour any payments due by the tax settlement date. Upon receiving the completed Tax Return and Self-Assessment Form reflecting the declarations made by the taxpayer, the CFR will issue a tax statement. It is important to note that the tax statement is not an assessment raised by the CFR but simply determines uncontested figures supplied by the taxpayer to the CFR.

Adjustment Forms

The Tax Statement is not in any way final, and if the sole-trader/ businessman needs to make adjustments, corrections  or additions to the Tax Return and Self-Assessment originally submitted, before or after receiving a Tax Statement, he/she  may do so by filling a ‘further return’ ( Adjustment Form - AF1).  If the Tax Statement contains incorrections, he /she may file a Correction Form (AF) to correct the Tax Statement.

While the Correction Form (AF), includes pre-printed information on the income declared and available to the CFR, which may be corrected by the sole-trader/businessman, the AF1 is always issued blank, and it is the sole-trader/ businessman who must complete the boxes. It is important to note that filing of the Adjustment Forms does not relieve the sole-trader/small business from any penalties, which he/she may have incurred on account of any omissions in the Tax Return and Self-Assessment.

Anyone who files an Adjustment Form and ends up with a balance to be paid, is to settle the payment along with the filing of the AF/AF1 and not wait until a new statement is issued, to minimise the interest applicable on late payments. Interest is charged from the relevant tax settlement date.

 

Provisional Tax and Social Security Contributions Booklet