Introduction
If you are self-employed in Ireland it’s important you are aware of what you can and can’t expense. One of the best ways to lower your tax liability is to ensure you have captured fully all of your business expenses. In Ireland there are specific things which you can and can’t expense. It’s important that you are aware of both so you can keep your tax liability to a minimum while also adhering to the rules set out by revenue. In this article we will run through what you can expense and how to calculate less straightforward expenses such as your rent if you’re working from home.
Track Expenses & Keep Receipts/Invoices
Firstly, it is incredibly important you keep track of all of your expenses. This is something you need to do regularly. Little and often is key. You do not want to leave it until the last minute before your income tax return is due. It is mostly likely you will miss certain items and this will result in you paying higher taxes.
Also, you need to keep a record of your receipts and invoices as Revenue can ask for proof of expenses under certain circumstances.
Self-Employed General Allowable Expenses in Ireland
Advertising & Marketing
Any expenses related to promoting your business can be expensed. Payments made to Google or facebook to promote you business can be expensed. Payments made to create your logo or website can be expensed even if the business hasn’t traded yet. More below. There is also direct guidance from revenue on what can be expensed.
Salaries
Any salaries of those working for you can be expenses. But please note your own salary cannot be expensed if you are self-employed or a sole trader. You also cannot expense any drawings used for to pay for goods or services which are not used by the business.
Professional Fees
Any accounting fees or consultancy fees you have paid can be expensed. Like most pre-trading expenses these can be offset against your future trading income. Please note, certain conditions do apply. More on this below.
Travel
If you travel for business you can expense your travel fees, accommodation and the cost of meals while away from your normal place of work. It is important to note that Revenue will not accept deductions for travel or subsistence expenses of the self employed based on the civil service rates. This is only available to employees.
Training & Education
Any training courses which you undertake can be offset against your total income as long as these courses are relevant to the trade of the business. The cost of educational material can also be expensed.
Interest and other bank fees
Any interest on loans can be expensed as well as bank charges and other fees. Your bank should be able to provide you with a statement of any fees and charges you’ve paid.
Insurance
Any insurance premiums you pay like any other expenses which arises from you engaging in business activities can be expensed. These include property and indemnity insurance.
Purchase of Assets
Assets are depreciated over their useful life. You can expense assets through capital allowances. Most assets from a tax perspective are depreciated over 8 years. Meaning, each year you have a capital allowance of 12.5% of the purchase price of the asset.
If you rent a room on airbnb. If that room is only used by people on airbnb you will have a capital allowance for new beds or televisions. If you buy a new desk and computer for your business so you can work from home, these will have a capital allowance of 12.5% each year for 8 years.
Self-Employed Home Office Expenses in Ireland
If you are working from home there are a number of expense you can claim. It’s important you utilise all of these expenses to minimise your tax bill. Please see our guide on working from home in Ireland.
Rent & Mortgage
If you are working from home you are allowed to expense a portion of your rent to the business. If you have a dedicated room, this will be based on the square meters of the room as a percentage of the total area of your home.
It is recommended you do not try to expense your mortgage. It will be taxed as income so there’s no benefit in doing so. You can try to expenses the interest only portion but make sure this is excluded from your mortgage interest relief which is due to end 31/12/2020. The rent a room scheme does not apply to businesses renting space.
Electricity & Heat
Similar to rent you can expense both of these. If you live alone you would expect the percentage to be much higher than your rent.
Phone & Internet
Generally, it’s better practice to have a separate phone for business and personal calls. It’s easier to track and calculate what the business expense is.
You are allowed to use your business phone for personal use and you will not be liable for benefit in kind if the use is minimal and it does not result in additional charges to the business.
Furniture & Equipment
As mentioned above you can claim a capital allowance against the cost of office furniture and equipment in your home. These assets are assumed to have a useful life of 8 years which means you can expenses 12.5% of the purchase price each year.
You can also use these assets for personal use as long as this use is minimal and does not result in additional costs to the business.
For more information see Revenue’s guide.
Self-Employed Pre-trading Expenses in Ireland
A deduction is available under Section 82 TCA 1997 where the expenses can be offset against income generate through the trade or profession when the expenses incurred meet the following two criteria:
- The must have been incurred within the three year period immediately before the start date of the trade or profession
- The expenses would be ordinarily expensed if they had been incurred after the commencement of the trade.
There are some exceptions to this, one being rental property which doesn’t allow a lot of pre-letting expenses.
Self-Employed Motor Expenses Ireland
Are you covered by insurance?
If you plan on using your own car for business use make sure you are covered by your insurance. A number of insurance policies specifically exclude using your car for business use. If you have an accident and it is revealed you were using the car for business use you will not be covered.
Personal car for business use
If you are using your own car for business use you can claim a portion of the running expenses of he car which include:
- Insurance
- NCT
- Fuel
- Repairs
- Servicing
- Tyres
The amount you apportion to business use must be reasonable and justifiable. You cannot expenses journeys to and from your work location.
Using a business car for personal use
Generally it’s better not to use a company car for private use. The benefit in kind is very expensive. Particularly if you’re driving a second hand car, the benefit in kind is based on the original market value. There is more information on Revenue’s website.
Exemptions - Car Pool
If a car is deemed to be a “pooled car” ie more than one employee has use of the car then there may, under certain circumstances, be no benefit in kind payable.
From Chartered Accountants Ireland: “One or more employees using a car during the course of the tax year, or their employer, may claim that the car is a “pooled” car.”
- The car must not stay near the residence of any employee regularly overnight
- The car is made available for use by more than one employee
- Any private use is minimal
Self-Employed - Things you Cannot Expense in Ireland
Clothing - Unless protective
This means you cannot expense any business attire. There is a page on the Revenue’s website for dis-allowable expenses but it’s not very detailed.
Food or Travel
Unless you are working away from your normal place of work you cannot claim travel or expenses.
Client Entertainment
Client entertainment is strictly excluded as an expense. Even though entertaining clients can be classified as a marketing expense, it cannot be included.
Staff Entertainment - Must be reasonable
You can have seasonal parties, meals and other events for employees. The cost of these events must be reasonable and available to all employees. More information available here.
Your Salary
As a sole trader or being self employed, you can not expenses your salary. Your salary is the net profit.
Structural Alterations to Your Home
If you are setting up an office in your home your can add furniture and equipment as described above. However, you can not make major structural alterations to your home.