A Business Expense?

swanvill

Hi,

Your opinions would be greatly appreciated.

A person running a small business from home, is balancing her work with minding her children during the day. However when ever she has to meet a client or work away from home on location has to put her children into child care, as there is no one else to mind her children when she is out of her home. Can she claim the cost of the child care as a tax deductible expense, once she has an invoice for it?

dbran

Hi Swanvil

Unfortunately I do not think so.

It is not wholly and necessarily incurred in the course of business. It is incurred as a result of deciding to have a family, both parents working etc which is a personal choice.

To look at it another way, if you were a similar PAYE worker and you received a payment from your employer for childminding facilities it would be treated as notional pay or BIK.

Hope this helps

dbran

swanvill

Thanks Dbran for your reply I feel it would pass the necessary test but may not pass wholly test.

I am two minds one to exclude it or include it and then highlight in an expression of doubt on the return & wait for Revenue to decide. Do you see any disadvantages in the second option?

Just a small point to note about people's choices the person is a single parent thus there is no one else to mind the kids but her. Second she has a choice to survive on Lone Parents Allowance or use her skills to try & earn money to provide a better life for her & her kids (twins), so work is not really a lifestyle choice. Third not every pregnancy is planned

Thanks again for replying to my query

smeharg

swanvill wrote: »

Thanks Dbran for your reply I feel it would pass the necessary test but may not pass wholly test.

I am two minds one to exclude it or include it and then highlight in an expression of doubt on the return & wait for Revenue to decide. Do you see any disadvantages in the second option?

Just a small point to note about people's choices the person is a single parent thus there is no one else to mind the kids but her. Second she has a choice to survive on Lone Parents Allowance or use her skills to try & earn money to provide a better life for her & her kids (twins), so work is not really a lifestyle choice. Third not every pregnancy is planned

Thanks again for replying to my query

the "wholly" part of the test isn't really a problem, as expenses can be apprortioned between business and non-business.

Child care isn't "exclusively" incurred in the course or furtherance of business. Dbran is correct in saying it is incurred as a result of lifestyle choice. The children need looking after whether that's by the parents, family or a professional childminder.

I wouldn't bother using the expression of doubt. Revenue tend to get annoyed if it is used to express a doubt that isn't genuine, ie where the tax treatment is well established as it is in this case.

dbran

Hi Swanville

As you know I wasnt trying to be judgemental on the issue and I was answering your query on the basis of tax alone.

In my opinion it would not pass the "necessary" part of the test. If for example I was providing accountancy services to a client in similar circumstances, the fact that I may have incurred child minding costs would not have a bearing on my ability to provide the service. Indeed if I was lucky enough to get a neighbour to mind the child and to not have to incur the cost then I would still be able to deliver the same level of service to my client. A rival who had no children would equally be able to provide the service. So on that basis the child minding cost is not "necessarily incurred" in order to provide the service. It is simply a cost that I have to incur to be able to do the things I need to get done in life.

Hope this helps

dbran

smeharg

dbran wrote: »

...

In my opinion it would not pass the "necessary" part of the test.
...

The test is "wholly and exclusively incurred in the course or furtherance of business". The "necessarily" condition applies to expenses incurred in connection with employment.

The childcare costs are incurred as a result of the children needing childcare.

Nevertheless, no deduction is allowed for domestic or private expenditure.

swanvill

Thanks Again Dbran & smeharg for the effort you have put in answering my query. You are both right & I have learnt from your responses. Dbarn don't worry about the whole child comment, I really do appreciate your thorough answer.