How to figure out what can be spent using company money

zig

I am looking for advice on this topic. We have good accountants but they havent really been able to answer this question. Basically because they say there is no "right" answer.

My question is , is there a definitive way of determing when its ok to use company money on or not? Is it basically something where we determine ourselves that its for the company, not for ourselves personally?

Our accountants told us it would be looked at on a case per case basis if we were getting audited.

I will give you a few examples.

We would like to buy fruit for the office using company money on a very regular basis.

My colleague bought books recently relevant to his side of the job but also they were just books he enjoyed reading, our accountant subsequently told us we could have bought them through the company as they benefited the company.

I love coffee, I understand that I couldnt use company money to be buying myself take away coffees or if I was just having a coffee sitting in in a café, but I could if I was buying a bag of coffee/tea for bringing to the office. I also could buy a coffee at a café if I was with a client.

I know we are allowed give up to €500 to each of the staff as a voucher before Christmas (after a certain date in October) and not have to consider PAYE / PRSI for it.


The list could go on, Im not really looking for answers to the above ones (because I know them), more just generally how does one tackle this?

I have read some of this, but its still not really fully clear tbh. http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/faqs/

Johnmb

zig wrote: »

I am looking for advice on this topic. We have good accountants but they havent really been able to answer this question. Basically because they say there is no "right" answer.

My question is , is there a definitive way of determing when its ok to use company money on or not? Is it basically something where we determine ourselves that its for the company, not for ourselves personally?

Our accountants told us it would be looked at on a case per case basis if we were getting audited.

I will give you a few examples.

We would like to buy fruit for the office using company money on a very regular basis.

My colleague bought books recently relevant to his side of the job but also they were just books he enjoyed reading, our accountant subsequently told us we could have bought them through the company as they benefited the company.

I love coffee, I understand that I couldnt use company money to be buying myself take away coffees or if I was just having a coffee sitting in in a café, but I could if I was buying a bag of coffee/tea for bringing to the office. I also could buy a coffee at a café if I was with a client.

I know we are allowed give up to €500 to each of the staff as a voucher before Christmas (after a certain date in October) and not have to consider PAYE / PRSI for it.


The list could go on, Im not really looking for answers to the above ones (because I know them), more just generally how does one tackle this?

I have read some of this, but its still not really fully clear tbh. http://www.revenue.ie/en/tax/it/leaflets/benefit-in-kind/faqs/

Basic rule of thumb for a company is that the expense has to be wholly and exclusively for the business. It is ok for staff to benefit as well, but it has to be the company mainly. For example, in the coffee situation, the reason the office coffee is allowed is because it is in the office, during the course of business. No staff can use it on their own personal time. Therefore, it is wholly and exclusively for the purposes of the business despite it being a benefit for employees. Once you are happy the company is benefiting rather than just you, the expense should be ok. It is ok for you to benefit too, but there must be some link to why it is a company expense.

Re the vouchers, the limit is one per employee per year, it doesn't matter when in the year, it doesn't have to be for Christmas, nor after a certain date in October.

PARlance

You may be suffering from small company guilt / fear. Many people seem to think that company expenditure needs to be on items that can be linked to creating revenue / profit. They don't.

As said above, "wholly and exclusively" is the terminology used. In reality, you just need to be able to look a Revenue Auditor (if the day ever came) in the eye and say "yes, that was bought for the business... and if you pop into the canteen, you'll see the Van Gough I bought" and when they go to check it can't be a painting by a 6 year old while the original is hanging above your mantlepiece.

Your accountant will more than likely air on the side of caution when asked about this kind of thing, that's what the vast majority of them will do.
Fyi, coffee on the go is allowable too, if you're en route to a meeting / have to work out of office. You need to keep a record / note of the details.

pedroeibar1

PARlance wrote: »

You may be suffering from small company guilt / fear. Many people seem to think that company expenditure needs to be on items that can be linked to creating revenue / profit. They don't.

As said above, "wholly and exclusively" is the terminology used. In reality, you just need to be able to look a Revenue Auditor (if the day ever came) in the eye and say "yes, that was bought for the business... and if you pop into the canteen, you'll see the Van Gough I bought" and when they go to check it can't be a painting by a 6 year old while the original is hanging above your mantlepiece.

Your accountant will more than likely air on the side of caution when asked about this kind of thing, that's what the vast majority of them will do.
Fyi, coffee on the go is allowable too, if you're en route to a meeting / have to work out of office. You need to keep a record / note of the details.

OP, Company money belongs to the company. As a director/officer of the company you have a fiduciary duty to the company to safeguard it. (Under the latest Companies Act and recent cases there is a trend that the duty of care extends also to the interests of the staff, creditors and shareholders.) In the event of the company failing, you will also have to justify all expenditure to the liquidator and possibly the High Court. General expenditure will not be an issue, but if you have a shop and you use company borrowings to buy a boat for the staff to use, it would be poorly viewed.

Bandara

pedroeibar1 wrote: »

OP, Company money belongs to the company. As a director/officer of the company you have a fiduciary duty to the company to safeguard it. (Under the latest Companies Act and recent cases there is a trend that the duty of care extends also to the interests of the staff, creditors and shareholders.) In the event of the company failing, you will also have to justify all expenditure to the liquidator and possibly the High Court. General expenditure will not be an issue, but if you have a shop and you use company borrowings to buy a boat for the staff to use, it would be poorly viewed.

Unless it's a boat shop

PARlance

pedroeibar1 wrote: »

OP, Company money belongs to the company. As a director/officer of the company you have a fiduciary duty to the company to safeguard it. (Under the latest Companies Act and recent cases there is a trend that the duty of care extends also to the interests of the staff, creditors and shareholders.) In the event of the company failing, you will also have to justify all expenditure to the liquidator and possibly the High Court. General expenditure will not be an issue, but if you have a shop and you use company borrowings to buy a boat for the staff to use, it would be poorly viewed.

Poorly viewed. What exactly is that?

You are wrong in stating "you will have to justify all expenditure to the liquidator and possibly the High Court" if the company fails. There are many ways a company can fail without a liquidator being appointed, let along appearing in the High Court.

If the boat was wholly and exclusively for the company then it's ok, it could also be seen as an investment and if liquidation was pending, it could and should be sold. If you're letting Johnny in IT use the boat to commute to and from work then that's a different story and there'll be BIK.

Yes a director / officer has a fiduciary duty to safegaurd the company. But they are also entitled (obliged in my opinion) to work within the laws to pay as little tax as possible. You don't want the company "failing" because you didn't avail of every opportunity out there.

OP, don't be afraid to work within the law. If you have queries over something, my advice would be to present a case to your accountant to see if it would hold up rather than just asking general advice. It will save on wishy washy, non committal answers. Force them to earn their money, they'll cover their ass in any case.

Leaving Van Gogh and yacths aside. Books, coffee, office supplies are all well within the law as long as they're wholly and exclusively for the business (there doesn't need to be a clear and direct link to generating revenue etc). They don't even need to be business related books, build a collection for your staff to relax at lunch if you want.

mneylon

Erring on the side of caution is not a bad thing

As others have pointed out ..

If it's for the company's use then it's a valid business expense.

So in our offices, for example, we have:
- fresh fruit
- coffee
- tea
- cakes for birthdays

When you're out of the office for business meetings / trips you can expense reasonable things. So, the coffee etc., you got while waiting for the client or supplier would be fine, but your night out on the town with your friends (who aren't clients, employees or suppliers) wouldn't be.

Books, subscriptions, magazines etc., if they're somehow related to your business are valid expenses. Same with professional memberships and a bunch of other things.

Bottom line - can you justify the expenditure as being valid or not?

Homer

So I'm guessing that a gym membership (even for a director of a company) or its employees couldn't reasonably be expensed?

Johnmb

Homer wrote: »

So I'm guessing that a gym membership (even for a director of a company) or its employees couldn't reasonably be expensed?

There is absolutely no problem expensing it to the company, however it would have to be charged as a BIK to the employee/director involved.

Homer

Thanks John. Appreciate that.

JMR

Homer wrote: »

So I'm guessing that a gym membership (even for a director of a company) or its employees couldn't reasonably be expensed?

If the membership of a gym is required by the member of staff (or director) in order to carry out his / her duties for the company then it can be deemed to be wholly and exclusively for business purposes and is a legitimate company expense. probably not valid for 99.9% of businesses though:)

PARlance

JMR wrote: »

If the membership of a gym is required by the member of staff (or director) in order to carry out his / her duties for the company then it can be deemed to be wholly and exclusively for business purposes and is a legitimate company expense. probably not valid for 99.9% of businesses though:)

You can pay for staff to go on quit smoking courses if you want. Improving staff wellbeing and health will improve 100% of companies.... as stated above, BIK comes into the equation for certain expenditure. But it's absolutely a valid business expense.