Claiming expenses as a director of umbrella company

Hi All,

I will be beginning working as a contractor in the next month and have setup as a director of an umbrella company. I am getting conflicting information from some colleagues that are set up similarly and the calculator that contracting plus shared with me. If claiming expenses for a phone, laptop etc. Do you receive the full price of this as a tax write down (Apologies if incorrect terminology!) Or are these expenses taxable so only actually receiving 50% back in your pocket? Hope that makes sense.

Thanks

ari101

I think the below might explain what they are inferring...

Let's say (very simply) you earn invoiced income of 100k and spend 10k on allowable expenses (the full amount they cost) you pay yourself the remaining 90k on payroll and breakeven.

Now if you didn't pay any expenses through the company you could take a higher salary (100k) but you'd have to give revenue half of the extra 10k in income tax at that levels. So you'd get 5k more into your back pocket in net pay, but if you still needed to spend 10k on expenses and didn't put them through the company, you'd be 5k worse off overall ..

You have to put the full cost of an expense (assuming it is wholly trade related) through the company, but when you factor in the reduced possible salary at high tax rates you only save half of what the expenses cost.

Thank you for the response, that makes complete sense and answers my question!

JosTep

https://www.boards.ie/discussion/comment/118815258#Comment_118815258

Not strictly true - if, as a self employed person, you have the expenses as the Ltd company - if they are incurred, wholly and necessarily for the business, then they can be claimed as an expense on the Income Tax Return.

But if the level as above - you haven't factored in CT of 12.5% on the 90k which would lower the salary available.

SureYWouldntYa

https://www.boards.ie/discussion/comment/118859609#Comment_118859609

The salary would also be an expense of the company

If he was to take the full 90k as salary, then the profit for the year would be nil, so no CT payable

ShelbyInc

The poster above is correct, the company will likely make weekly/bi-weekly/monthly periodical payments to the director and so cost base will erode taxable company profits.

However, I do feel it’s important to make the distinction between you and the separate entity which is the company.

For example, who is buying the asset, you or the company?

If the company, are you intending to keep the asset in the companys name?

Is the company paying the recurring costs associated with the asset?, e.g monthly phone bills

Is the asset being used or partially used by you for private use?

These are the types of questions you should be asking yourself.