Allowable Expenses - Self-Employed

DumbAngel · 03-09-2012 01:05PM #1

A little background first guys - I've recently set up as a Sole Trader and the nature of the work involves fairly frequent travel abroad, providing services to one company in particular.

They organise air-fare but it's left to me to cover my fuel / food / hotels / cab fare / parking at Dublin airport etc. The arrangement is I am then reimbursed in full after submitting vouched expenses. I keep digital copies of all receipts for this purpose.

My question is this - If my own fee is €1k and expenses total €500 (thus invoicing for €1500), will I then be liable for income tax on the full amount paid to me?

Common sense would tell me no, but the information online appears somewhat ambiguous. I'm not VAT registered, as the volume of business will come in below the threshold. Any help much appreciated.

What expenses can I claim for?

You can claim for any business expenses which you have incurred in order to earn your profits. These expenses are normally referred to as revenue expenditure.

Revenue expenditure is your day to day running costs and covers such items as:

Purchase of goods for resale
Wages, rent, rates, repairs, lighting and heating etc.
Running costs of vehicles or machinery used in the business
Accountancy fees
Interest paid on any monies borrowed to finance business expenses/items
Lease payments on vehicles or machinery used in the business

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

srsly78 · 03-09-2012 04:34PM

This question comes up all the time, and the answer is always the same: get an accountant. Not needed for book keeping maybe, but needed for general advice about this stuff.

If you are travelling abroad a lot get advice about subsistence expenses. Rates for these are very hard to find online, need to ring up the tax office. Rates vary depending on location. I know from personal experience that overnights in London are worth e190. This is the UNVOUCHED subsistence allowance, in your case since you pay your own hotel etc this may not be worth it and you would want to go with vouched.

barneystinson · 04-09-2012 01:23AM

srsly78 wrote: »

This question comes up all the time, and the answer is always the same: get an accountant. Not needed for book keeping maybe, but needed for general advice about this stuff.

Good advice.

srsly78 wrote: »

If you are travelling abroad a lot get advice about subsistence expenses. Rates for these are very hard to find online, need to ring up the tax office. Rates vary depending on location. I know from personal experience that overnights in London are worth e190. This is the UNVOUCHED subsistence allowance, in your case since you pay your own hotel etc this may not be worth it and you would want to go with vouched.

Bad advice - OP is a sole trader and the above only applies to employees/directors.

srsly78 · 04-09-2012 10:36AM

And the accountant might advice someone to operate as a Ltd company for that reason :pac:

DumbAngel · 04-09-2012 12:56PM

Thanks folks.

Having dug a little deeper, I'm finding advice pointing to the fact Sole Traders cannot claim subsistence based on Civil Service rates, but may claim in certain instances where travel is deemed to be an integral component of the business.

I am certainly also of the mind to engage the services of an Accountant sooner rather than later, as I believe it'd be a false economy not to.

What about Food and Subsistence Expenses?

It is a long established principle that the cost of meals taken at the place of business is not allowable for tax purposes. In addition, expenses incurred on meals consumed away from the place of business are, in general, not wholly and exclusively laid out for the purposes of the trade or profession since everyone must eat in order to live. Costs of meals may be allowable where a business by its very nature involves travelling, as in the case of self-employed long distance lorry drivers, or where
occasional business journeys outside the normal pattern are made.

This post is taken directly from revenues guide IT48

http://www.revenue.ie/en/tax/it/leaflets/it48.pdf

mad4tradMayo · 19-09-2012 10:18AM

Receipt of reimbursed expenses should not be included as Turnover in your accounts, but neither should any of the expense receipts be included as a business expense. If you invoice your customer for the fee plus expenses as in your example €1500 then your accountant will record the full invoice. You should then record all expense receipts as say travel & subsistence expense; but your accountant would record an entry in accounts to reduce both the turnover and expense amounts for the amount of the reimbursed expenses as follows:
The reason for recording these transactions is to have an audit trail for Revenue who at some point in the future may want to audit your accounts and this would satisfy them as to why you received €1500 but only recorded €1000 as sales revenue.

Debit Sales €500 and Credit Travel & Subsistence €500

Hope this is not too confusing!!

Allowable Expenses - Self-Employed

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