Which business expenses are deductible?

lola_run

I've just spent the past few hours doing my accounts. :-( I’m self-employed and run a services business!
I don’t want to have to hire an accountant, as I’ve actually studied some accountancy before and have a good grasp of how to do a profit and loss account.

However, I do admit I’m a little rusty, so if any of you would be so kind as to answer to my questions or point me in the right direction of a paper or online resource that would be helpful to me. I’ve been bogged down in doing my job so well to win clients that I’ve kind of neglected the financial aspect of things. Now I’m eager to get back on track.

If I understand correctly in order to reduce my income tax burden, I should try to keep my profits down. One way of doing this is by deducting business expenses from my business income. (Are there other ways of reducing profits?) I will be paying income tax at the rate of 20%, as I am self-employed.

I’m not registered for VAT as I’m not in a position to charge higher rates and really don’t want more paperwork, not just yet anyhow.

These are some of the things I would like to write off as business expenditure but not sure if I can write them all off 100% (does it depend on the amount?) All of the following can be justified as being crucial in order to survive/keep up to date in my profession.
Mortgage on an apartment/office in a foreign country
Academic resources, such as books, audiovisual material
Language courses
Cultural visits (cinema, theatre)
Flights/transport to foreign countries to visit clients
Flights/transport to foreign countries for language stays
Further and ongoing education

When making my returns, would all of the receipts for the above have to be in my name for the Revenue or do I actually submit the receipts to the Revenue at all?

I also plan on doing an MBA in 2008 and was wondering if I can write all of this or just some of it off against taxes.
TIA!

deebm

Its difficult to tell what is tax deductable without knowing exactly what your services business is. Whether or not an item is tax deductable does not depend on the amount.

But from your list I would say yes to:
Academic resources, such as books, audiovisual material
Flights/transport to foreign countries to visit clients
Further and ongoing education
Language courses

But no to:
Cultural visits (cinema, theatre)
Flights/transport to foreign countries for language stays

The Mortgage on an apartment/office in a foreign country is more complicated, is it 100% business use or is proportion of it personal. Is the apartment sub let for any period of the year. All that would be allowed even if 100% business is the interest element of it.

When you go abroad do you go on your own or with partner other than business partner.

The receipts for all expenses should be in your name, while you do not have to send them to the revenue at the moment (ie with the return) they can require sight of them in the even of an investigation.

In addition you could charge as expenses, computer costs including internet access, phone costs, car expenses including petrol/diesel, stationery costs etc. The list is endless but as stated earlier it really depends on what you actually do.

The rate of tax you will pay will depend on the amount of profits you make. You will not pay tax on it all at 20% unless your profits are below a certain limit, €34,000 for single person for 2007.

I do think that a visit to an accountant would be worthwhile.

Newaglish

I think you'd be best off going to an accountant. You could spend a lot of time and effort trying to figure out which of your expenses are allowable and which are not. Plus, once you've done that, you could make a couple of mistakes and go through a fairly awkward revenue audit!

I know you say you have experience with accountancy, profit & loss etc., but this will not particularly help with your tax returns.

For example, in a P&L, you'd charge depreciation on your office as an expense, whereas in your tax computation you'll be deducting capital allowances, which depend on rates set out by the Revenue, and are also affected by the percentage to which the office is used for personal reasons (ie. the fact that it's an apartment/office).

If you did want to do it yourself, you'd be best off going out an buying a Taxation textbook which will give you a fairly good foundation. Something along the lines of the Student's Tax Handbook. If it's a relatively simple company (ie. you're not buying/selling large amounts of shares in companies holding industrial buildings, or mining for oil) you should be fine with a book like that. It'd take quite a while though to cover all the info you need to know, as there are a lot of ifs and buts and exceptions in tax law, and everything has to be exact.

If you met with a few different people in accountancy practices they could give you a fairly good idea of what costs etc. you'd be looking at to have someone do it for you.

While I don't work in practice, I know of a self-employed tradesman who gets his accounts & tax computations done for about €1,000 once a year. Does that sound right? Maybe someone can confirm that for me!

Kingkong

There is a thing called expression of doubt. Its on the tax form. Basically if your unsure amount certain items you can tick the box and attach to the form details of the items. The revenue then reviews it and assesses if its allowable. This way if the item is not allowed there is no risk of revenue interest chrgs

kluivert

Business expenses - expenses used wholly for the purpose of the trade.

Anything else is personal.

See an accountant in regards to this.

I do accounts for my friend, who is self employed.

I do the accounts, he buys the beer at the weekend.