Help with Expenses for Small business

blueyedson

A friend of mine has started her own business, its a small retail business with a couple of part time staff helping her out. SHe probably wont get any wages in the first year, at the moment she wouldnt be making enough to cover all costs inclusing paling staff wages. She hopes to get the business to about break even by the end of first year.

Now I'm aware of some of the expenses she can claim for , am hoping to get some more idea's here. Obvisiously she wants to make sure she is maximising expenses to claim for when the money is there, as she loses her paye tax credits becuse she is a director etc. (ANyone thinking of starting up take note of this ;although you do keep your personal tax credit)

She is claiming for
mileage (business trips from place of work returning to place of work)
mob phone credit (still on ready to go, cant afford business bill ph yet)
20% of household phone and heating bills (room in house is also office)

Anyone add to this list?
Thanks

johnsmith13

She should be able to claim for the following

Advertising

Reparis - To any business item that she has

General Office Expenses - Office supplies, postage, books, cleaning/janitorial services, flowers and plants, snacks and beverages, should all be deductible.

Bank and Merchant Fees - Bank-related fees, such as monthly, ATM and online banking costs, as well as merchant service fees, including Pay Pal related costs, should be deductible.

Cedrus

If journeys mean long periods away from normal place of work eg trade shows or occasional on the Road sales then Subsistence can be claimed, there are different rates depending on how long she's away. For this and for mileage, records are critical revenue and accountants will want to see recorded date, distance, reason, it's something an audit could start with. Revenue have two must read leaflets IT51 & IT54 on their website.
Any safety or special work clothing is claimable.
Training.
Computers, software, IT servicing.
Broadband, EMail, Web hosting/design.
VAT registration isn't always necessary and can mean a lot of extra paperwork but it widens the scope of claimable items.

I'd question "snacks and beverages" above, it depends, if they fall under subsistence - yes, if they are provided for clients or because staff can't get out for breaks - maybe, if you want a free lunch - No. Having said that, petty cash is pretty much free fire zone.

Some things are black and white such as mileage as they are prescribed by revenue and the guides are very straightforward. Other things seem to operate on a more ad hoc agreement between individual accountants and local tax inspectors (because of legacy interpretations?).

The Apprentice

She could also claim for post business start up costs also such as pre purchase of equipment, vehicle or pc for new business..

smeharg

Be vary wary of relying on "advice" submitted to a forum.

Some of the advice given by some of the previous posters ranges from accurate to misleading to wrong to off the wall!

You mention that your friend is a director, so assuming she is trading through a limited company there are 2 things at play:

1. Expenses and business costs allowable for corporation tax purposes; and
2. Means of extracting cash, in a tax efficient manner, by way of director expenses.

For corporation tax purposes anything "wholly and exclusively" incurred in the course of the business is deductible. There are notable exceptions though, such as client entertainment and depreciation charges. Have a look at the Revenue website for further guidance.

Regarding directors' expenses, mileage and subsistance can be claimed at civil servant rates, tax free for ligitimate business travel. A mobile phone can be provided by the company, free of tax, provided any personal use is incidental. If she is using her own mobile for the business she can claim for the cost of business calls.

If she is using a home office she can claim for a proportion of the costs incurred in running it. This should be based on someting tangible, such as floor area and time used for business. If she's using it for a few hours a week it's probably not worth the hassle. 20% seems extremely excessive.

She should try and take a salary to exhaust her tax credits.

To clear-up some of the more ludicrous suggestions by other contributors:

Registration for VAT makes no difference to what can be claimed.
Client entertainment is never allowable (you can put it through the books, but it has to be adjusted in the tax computation).
What is allowable or disallowable does not operate on an adhoc basis between individual accoutants and tax inspectors.
Petty cash is definetly not a "free fire zone"
Be careful with equipment - it may be capital in which case 12.5% of the cost is allowable.
Fixtures and fittings is another area to be wary of as is repairs.

Cedrus

smeharg wrote: »

Be vary wary of relying on "advice" submitted to a forum.

I agree totally, net forums are a useful place to start homework but are about as reliable as asking your mates down the pub and depend on peoples memory of what they understood their professional adviser said. Only use this 'Advice' to form questions for your professional adviser.

smeharg wrote: »

To clear-up some of the more ludicrous suggestions by other contributors:

Registration for VAT makes no difference to what can be claimed.

Are you saying that VAT can be claimed if you're NOT registered, or are you saying that VAT CANNOT be claimed if you're ARE registered?

smeharg wrote: »

Client entertainment is never allowable (you can put it through the books, but it has to be adjusted in the tax computation).

You're the only person to mention Client Entertainment. I don't believe that hospitality (ie coffee and a biscuit) is considered Client Entertainment, the Hairdressers of Ireland are stuffed if it does.

smeharg wrote: »

What is allowable or disallowable does not operate on an adhoc basis between individual accoutants and tax inspectors.

Then explain the discrepancies between accountants advice across the country, why do so many small accountants refuse to deal with distant tax offices?

smeharg wrote: »

Petty cash is definetly not a "free fire zone"

This was a very casual use of words on my part, I will rephrase. If petty cash is minimal and is not abused it is unlikely to cause or become the subject of an audit. It is unlikely that an auditor will question the type of biscuits purchased using petty cash or who ate them, provided that the amounts transferred to petty cash are reasonable.

smeharg

Cedrus wrote: »

Are you saying that VAT can be claimed if you're NOT registered, or are you saying that VAT CANNOT be claimed if you're ARE registered?

Cedrus wrote: »

VAT registration isn't always necessary and can mean a lot of extra paperwork but it widens the scope of claimable items.

I'm saying VAT registration has no bearing on what type of expenses can or cannot be claimed. If you are not VAT registered then VAT forms part of the cost; if you are VAT registered you claim VAT back via your VAT return, and the cost to the business is the VAT exlcusive amount.

Perhaps you can explain how VAT registration widens the scope of claimable items?

Cedrus wrote: »

You're the only person to mention Client Entertainment. I don't believe that hospitality (ie coffee and a biscuit) is considered Client Entertainment,

Cedrus wrote: »

I'd question "snacks and beverages" above, it depends, if they fall under subsistence - yes, if they are provided for clients or because staff can't get out for breaks - maybe

This is why we must be careful of what we say. When you said "snacks and beverages" you meant coffee and biscuits; someone else could interpret that as canapes and drinks at a sales function, ie client entertainment.

Cedrus wrote: »

Then explain the discrepancies between accountants advice across the country,

Quite simply you're not always comparing like with like. There can be differences which the lay person may think are insignificant whereas they could mean the difference between allowable and disallowable.

Cedrus wrote: »

why do so many small accountants refuse to deal with distant tax offices?

I've never heard of this and have worked with different small firms that have had clients in various parts of the country and abroad.

unnameduser

Anyone starting a business needs to find a good accountant before they start. Otherwise it may well cost you money and heartache in the longterm.

The accountants fees can be written off btw!

Cedrus

smeharg wrote: »

Perhaps you can explain how VAT registration widens the scope of claimable items?

The VAT itself is the claimable item I was referring to.

This is why we must be careful of what we say. When you said "snacks and beverages" you meant coffee and biscuits; someone else could interpret that as canapes and drinks at a sales function, ie client entertainment.

That's why I questioned snacks and beverages which had been previously suggested and I said 'maybe'.
I have even been advised in the past that while the costs of providing coffee for clients refreshment in your premises are allowable, buying a coffee for the same client in a hotel is not.

Quite simply you're not always comparing like with like. There can be differences which the lay person may think are insignificant whereas they could mean the difference between allowable and disallowable.

My original point was that Revenue prescribe exactly what they require regarding travel expenses in easy to understand guides like IT51 & IT54, However there are other areas which are less easy for a "Lay Person" to understand.
My advisor would never allow me to draw income from my company without all deductions being made but I know several people whose advisers have no issue with working out taxes 15 months in abeyance. I think I can decipher the subtle differences there.

I've never heard of this and have worked with different small firms that have had clients in various parts of the country and abroad.

In the past I had an advisor who requested that I use his address as my registered office to ensure that he knew the tax inspectors personally, even playing golf with them. My current advisor has never requested this.


OP Find a good accountant, try to get one locally (you should spend time earning money not travelling to meet them), keep at least basic books (don't waste money paying someone else to sort out shoe-boxes full of receipts), ask loads of questions (they're the experts, but you're signing everything).

blueyedson

Hi,
just want to clarify the mileage claim

according to revenue web site for IT51, 46.25cents can be claimed for engine size up to 1.5litres...effective from march 2009

I noticed the allowable cost reduced in 2009 from 61.67 to 46.25 for that size engine...

Surely with the increases in petrol a person should be able to claim more than 46.25 or am I mistaken ??

Cedrus

blueyedson wrote: »

Hi,
Surely with the increases in petrol a person should be able to claim more than 46.25 or am I mistaken ??

No. the rates were higher before 2009 but were deemed to be OTT when the tiger got sick and were slashed back to match 2002 rates. They're still higher than what private sector companies would be paying.
Without rereading IT51, I think I remember that you can claim actual receipted travel expenses which MIGHT start making sense with the way petrol prices are going but it's a LOT more hassle than just using the set rates.