Self Employed? How much expenses do you claim in your Tax Return?

Meltdown

Hi all,

I'm self employed, work from home, and was just wondering how much other people are putting down for expenses, especially in the area of motoring expenses and lighting/heating/phones. Last year I put down €1,000 for each section. I don't really know if it should be more. Should I keep receipts for all parking/petrol if I'm only claiming €1,000 in expenses?

What other type of things are other self employed people claiming for?

My main grievance is that PAYE workers get a Tax Credit of about 1,270,00 which is worth about 6,000 in earnings, at the 20% tax rate. If I can’t claim 6,000 in expenses for the year then I end up paying more tax than a PAYE worker earning the same amount as me.

SouperComputer

I put down what my expenses were! if it was 2k I put 2k, if it was 16K, then I put 16K.

You should be conting anything that legitimately is an expense for your business. If you work from home, your company can contribute to rent, light and heat. Of course if you are renting and dont get receipts, then you cant expense it! The odd lunch can be expensed, but dont go nuts. A little travel.

Basically keep receipts for everything and expense what you can.

Have you spoken to an accountant?

Meltdown

Hi SouperComputer,

No, I haven't spoken to an accountant, can't afford one

I understand I am asking a 'how long is a piece of string' question, but it's really just to get a feel for what other self-employed people are claiming.

The 1,000 I claim for motoring expenses is less than €20 a week, I don't think it's excessive, and I never keep parking/petrol receipts.

I've never claimed lunch allowance.

Thanks for the reply

Melt

SouperComputer

theres a couple of accountants on boards who might be able to help you for small money

Like I say, you expense anything the leiginmately pertains to your business work. So fuel and parking count, you can expense a little for maintenace of the car, phonecalls it all ads up. Start digging you your receipts and CC statements!

Kelter

Hey Meltdown,

I've been doing a lot of thinking about this too. The proble3m for me is what is a business expense? At times the lines between my work and play are a bit fuzzy, so can I claim for meeting a friend to discuss possible business opportunities in the future?

Also what is a reasonable office overhead? In many offices staff enjoy free coffee, water, softdrinks, lunch, work nights out, etc. Should I try to capture these things in my tax return?

Also many regular staff get training provided by the company which can be questionable in relation to their work. Should I try to encompass that too?

Finally my girlfriend listens to my whinging and thinking out loud about the direction of my "company". Should I employ her? If she out the money directly into a pension it would actually make sense. Also I would be justified in paying a portion of her costs when we go on holiday.

The argument that you should talk to an accountant is missing the point a bit. If you have a good one, good for you, but as a self employed sort I would assume that you would want a bit more of a hands on approach to your tax liability. For me it is worth almost as much as more core work.

Do-more

As far as motoring expenses go you should be keeping a diary and marking down any daily travel in it and the reason for it. I know it sounds like a pain but once you form the habit of writing it up each evening it becomes second nature (this coming from someone who hates paperwork) you can then claim expenses at the prevailing civil service rates link
These rates represent the total allowable so you can't additionally claim for car servicing etc.

If you are out of the office for more than 5 hours you can claim a subsistence allowance of €16.32, or for more than 10 hours €40.01, these allowances are all unreciepted you just need to keep the diary!

Disclaimer: I am not an accountant and the above is correct to the best of my knowledge, please correct me if I am wrong...

jimmycrackcorm

Do-more wrote:

As far as motoring expenses go you should be keeping a diary and marking down any daily travel in it and the reason for it. I know it sounds like a pain but once you form the habit of writing it up each evening it becomes second nature (this coming from someone who hates paperwork) you can then claim expenses at the prevailing civil service rates link
These rates represent the total allowable so you can't additionally claim for car servicing etc.

If you are out of the office for more than 5 hours you can claim a subsistence allowance of €16.32, or for more than 10 hours €40.01, these allowances are all unreciepted you just need to keep the diary!

Disclaimer: I am not an accountant and the above is correct to the best of my knowledge, please correct me if I am wrong...

I think this applies to employees rather than the self employed. The self employed can though attribute a huge proportion of their motoring expenses to a tax write off and I think that €1000 a year is miserly against the acutal costs of owning and running a car.

While the OP might be upset about not having a tax credit and I certainly don't understand how that adds up to €6000 in extra earnings, I wouldpoint out that the OP can purchase a €2000 laptop for example and expense it which means a PAYE worker would have to earn over double that to pay for it.

Do-more

jimmycrackcorm wrote:

I think this applies to employees rather than the self employed.

I took a job as a "self-employed" salesperson a few years back and the above was what I was advised by the company at the time. Can anyone clarify if this is correct or not?

mckers

Hi Meltdown

I happen to know a little about this area, so hope the below helps.

So for your expenses....you should firstly add up all your expenses into their varuious categories, as you have probably already done in your accounts.

Try to analyse the amount of the time you would use your car for personal use - maybe one third of the time, claim the remaining two thirds against tax.

As for lighting and heat etc, you could possibly look at what portion of your house that is used for your businees....perhaps, one quarter, claim the full amount against tax.

Don't forget that if you buy any capital items (lifetime of more than one year), computers, desks etc during the year, you are entitled to claim a Wear & Tear (W&T) allowance. A W&T allowance is basically the tax term for depreciation. It curently stands at 12.5%, so if you purchase a desk for €200, you would claim a tax deducion of €50 (i.e. 12.5%) per year over 8 years.

If you have any staff, you can claim a tax deduction for staff entertainment. No deduction is available if you entertain clients.

Food - really depends on if you are working at home or at client sites.

A couple of final points, if you own the house you are using for your office, bear in mind that in the normal course of events, if you were to sell your house and it was your primary residence for the duration of ownership, you would have no tax liability. If you are claiming expenses for your office part, it could result in a small tax liability if you sell the house. If you own the house, it would also be reasonable to claim a portion of the mortgage interest payments against your self employed income.

If you rent, claim a portion of the rent against your income (ref light and heat expenses).

You could also consider putting money into a pension, the amount you can put in depends on your level of income and age. Let me know if you want further details.

Hope my essay helps!!!

Meltdown

Thanks a lot everyone for the replies, much appreciated, it's been very helpful. I've now done the dirty deed and sent off my tax return.

Thanks for the essay mckers, I learnt a few things there.

Regards
Melt

Reyman

jimmycrackcorm wrote:

I think this applies to employees rather than the self employed. The self employed can though attribute a huge proportion of their motoring expenses to a tax write off and I think that €1000 a year is miserly against the acutal costs of owning and running a car.

I have my own company and I claim the civil service mileage rates all the time for my official mileage.
My accountant has cleared this every year and I'm assuming it's correct.
Of course I record every mile I do with dates and business reason and then submit a travel claim (to myself as a director)

ChicoMendez

mckers wrote:

Don't forget that if you buy any capital items (lifetime of more than one year), computers, desks etc during the year, you are entitled to claim a Wear & Tear (W&T) allowance. A W&T allowance is basically the tax term for depreciation. It curently stands at 12.5%, so if you purchase a desk for €200, you would claim a tax deducion of €50 (i.e. 12.5%) per year over 8 years.

Hi,

ive a quick question on this. will the desk above be amongst ones reciepts also?


TNX !

mckers

Hi ChicoMendez

Not overly sure what your question is.....but....

...if you are querying whether you can claim both a trading expense and a W&T allowance for the purchase of a desk, the answer is no. You can claim either a trading expense or W&T expense depending on the type of expense incurred.

ChicoMendez

mckers wrote:

You can claim either a trading expense or W&T expense depending on the type of expense incurred.

how do you define which is which?

eg
whats a desk ?
whats a printer ?
whats a laptop ?

TNX

conical

If you can't afford an accountant, it would be worth doing a basic book-keeping course at your local enterprise centre (more than likely run by an accountant). I did one before I started out (over five evenings, cost ~€130) and found it to be very useful.

The info and tips the guy gave us would definitely save you the cost of the course in tax. For example... If you can do even a few hours PAYE work during the year you can claim your €1270 PAYE allowance!!

Also, yes, you should definitely keep your receipts, for EVERYTHING you're claiming for.

Best of luck. Good thread

-C

Littlepete

Hi Meltdown,

I know i'm a bit late getting in on this one but my advice is go get yourself an accountant. I know you say you can't afford one but really it sounds like you cant afford NOT to have one! Assuming your making a living from this business.

If the revenue decide to audit you and you can't prove your expenses it may cost you a lot, so you need all your reciepts and invoices. I keep my own accounts but have an accountant go over them anyway - essentially to get them stamped by the firm and to double check what im submitting.

My point is that revenue arent out extort you. They insist on you keeping accounts because without them a business doesn't know where it stands (you could be loosing money on certain jobs and not know it). Self Employed and business owners are allowed right off expenses which are advantagous. For example substinance (if your out of the office for more than 5 hours in 5, 10 or 24 hour incriminants) is an entitlement even if you don't spend the money your entitled to on food. Self employed CANNOT claim petrol on a car not owned by the business but can claim milage expenses - which is better than the cost of petrol as it allows for depreciation on your car.

Revenue want to encourage Self Employed and Business owners like us, an to do this the tax code is written in OUR FAVOUR. But without a good professional accountant you can't take advantage of all these incentives, find an accountant who deals with small business owners like yourself.

Ps. I'm NOT an accountant.

pitrn

conical wrote: »

If you can't afford an accountant, it would be worth doing a basic book-keeping course at your local enterprise centre (more than likely run by an accountant). I did one before I started out (over five evenings, cost ~€130) and found it to be very useful.

The info and tips the guy gave us would definitely save you the cost of the course in tax. For example... If you can do even a few hours PAYE work during the year you can claim your €1270 PAYE allowance!!

Also, yes, you should definitely keep your receipts, for EVERYTHING you're claiming for.

Best of luck. Good thread

-C

What is PAYE work and how can we go about doing it few hours a week? Curious to know.

bbam

this thread was from 2006..
maybe start a new thread.

Peterdalkey

bbam wrote: »

this thread was from 2006..
maybe start a new thread.

and in the jobs and work forum? http://www.boards.ie/vbulletin/forumdisplay.php?f=10

pitrn

I dont have rights to start my own thread

Peterdalkey

try here anyway http://www.boards.ie/vbulletin/forumdisplay.php?f=10 Use the search facility to find an approriate thread to ask your question>