Accounting that comes out of what you have already entered

This does not replace your adviser

It is worth saying early, because it is the question that always comes up. Cairos does not replace a tax adviser: it gives them the figures reconciled and on time, which is what an adviser needs to do their job properly.

What does disappear is the quarterly email with a spreadsheet attached and a folder of photographs of receipts. Your adviser logs in, looks and works on data that is already in place. In fact, plenty of firms use it with their clients for exactly that reason.

The prorrata, without the mystery

If part of what you invoice is exempt from VAT — a medical practice, a language school, a residential letting — you cannot deduct all the VAT on your expenses. That is where the prorrata comes in, and there are two of them, not one.

The general prorrata is a single percentage applied to all your input VAT. It comes from dividing what you invoice with a right to deduct by the total of what you invoice, and it is always rounded up to the next whole number: 19.2% is 20%. Sales of your own capital goods and property or financial transactions outside your usual activity are left out of the calculation, so selling the van does not spoil your percentage.

The special prorrata is finer-grained: it deducts 100% of the VAT on whatever you use only in the taxable part, deducts nothing on whatever you use only in the exempt part, and leaves the percentage for shared expenses alone. You can opt for it on the last return of the year — and it then binds you for three calendar years — but it is also compulsory when the general one would give you 10% more deduction, or more, than the special one would. That threshold dropped from 20% to 10% in 2015 and there is still material circulating with the old number.

During the year you do not use the current year's percentage but the final one from the previous year. The final figure is worked out on the last self-assessment of the year, and that is where the four quarters' provisional deductions are adjusted in one go.

The adjustment of capital goods is separate: goods of €3,005.06 or more are tracked for the four years following the year of purchase, or nine if they are land or buildings. And an adjustment is only made if a year's prorrata differs by more than ten points from the one for the year in which you deducted the VAT. Below that, nothing is touched.

The year-end close

Closing a financial year is not pressing a button: it is checking that nothing has been left hanging. Cairos runs the checks that get forgotten when it is done by hand.

• Invoices issued but not paid and expenses not yet settled, with how old they are.
• The year's depreciation still to be recognised.
• Adjustment of the prorrata and of capital goods.
• Draft documents that were never actually issued.
• And the reconciliation between the four form 303s and the 390 before you file it.

Once closed, the year is locked: you cannot enter items with an earlier date without expressly reopening it. That is what stops a journal entry from two years ago changing a return you have already filed.