Are wages claimable against corporation tax?

summereire

Hi everyone,

I'm running a business as a sole trader and have been considering becoming a limited company.

I was just on Revenue's website when I saw this:

What expenses can’t I claim for?

The general rule is that you cannot claim for any private expenses i.e.

Any private or domestic expenditure e.g. your own wages, food, clothing (except protective clothing), income tax etc.

http://www.revenue.ie/en/business/running/allowable-expenses.html

It says wages can't be claimed, but surely as a director of a limited company I would be an employee of it and aren't employee's wages deductible? If not, then whose are - directors, etc?

Thanks in advance for any illumination on this.

kennyb3

summereire wrote: »

Hi everyone,

I'm running a business as a sole trader and have been considering becoming a limited company.

I was just on Revenue's website when I saw this:



http://www.revenue.ie/en/business/running/allowable-expenses.html

It says wages can't be claimed, but surely as a director of a limited company I would be an employee of it and aren't employee's wages deductible? If not, then whose are - directors, etc?

Thanks in advance for any illumination on this.

The link is referring to a sole trader not a company.

summereire

Ok. So my own 'wages' i.e. money I withdraw from the company on a monthly basis, the amount of which will vary depending on performance, is completely tax deductible for the company along with any other similar wages to other directors or staff I take on?

kennyb3

Yes as long as

- its actually a company (people use the word so losely)
- the net wage is grossed up and included on the P35 and the paye, prsi and usc is paid over to Revenue

summereire

Great, thanks for clarifying that.

mari2222

1. The limited company's tax bill is reduced by the wagebill.

2. The employee will have tax etc deducted from the wages before he/she receives net pay.

3. A sole trader's profit is calculated without a deduction for any business owner's "wages" - the "profit" is available for the business owner to take out in "drawings", and it is the adjusted net profit that is assessed for the business owner's tax.

Note that there are a few different types of "profit" - the net profit, after deducting purchases and expenses from sales, is increased by adding back any private element to the expenses e.g. phone bills, or any depreciation included in the expenses. This means that some of the expenses incurred are disallowed for the purpose of arriving at the adjusted net profit. However, instead of depreciation being allowed as an expense, the business owner can claim what is called a "capital allowance", which has much the same effect as allowing depreciation.

summereire

Thanks, that's very helpful. I'm trying to figure out at the moment, as I'm renting offices and therefore claiming for that, are there capital allowances if I buy a commercial building and if so what are they?