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In our latest guest blog, from our partners at Taxback.com, learn how expenses should be dealt with in your self-assessed tax return.
When you work for yourself you can expect to incur a wide range of business expenses on a daily basis – no surprises there!
But what may surprise you is that many of these expenses can be used as deductions in order to reduce your overall self-assessed tax bill.
However, many Irish self-employed workers are unsure of what they can and can’t claim on their end of year tax return. The result is thousands of euro worth of tax deductions going unclaimed every year.
So, with this in mind, we’ve put together a handy guide on what and how to claim your expenses!
What expenses can I claim?
The first thing to know, is that, for an expense to be regarded as business-related – and therefore eligible as a deduction from your tax bill – it must have occurred wholly and exclusively in relation to your business. Where an expense relates to both business and private use, only the proportion of the cost that relates to business activity can be expensed.
The type of expenses that you will be eligible to claim will largely depend on the type of business you conduct.
For example, thousands of workers in the construction industry are required to purchase items (such as equipment and tools) to enable them to carry out their jobs. As we discuss below, many of these items are eligible for tax relief.
There are some common expenses which can generally be deducted. These include:
You may own a car that is used for both business and personal purposes, and if this is the case, you are entitled to claim relief on the costs of running the vehicle, e.g. fuel, repairs, and servicing. However, the expenses have to be related to business use.
In other words, if you are asked to travel from one place to another to carry out work, you can claim back a percentage of the costs of the travel.
Any equipment used specifically in relation to the running of the business may be reclaimable. To claim on equipment expenses you will need evidence (invoices and receipts) of your purchases.
Equipment may include tools, uniforms and stationery, and the costs must be directly related to the nature of the self-employment.
You will be able to claim some expenses on utility bills such as heating, lighting, telephone and internet, as well as the cost of insuring any business premises and contents.
Wear and tear
There is an annual allowance of 12.5% on wear and tear, over a period of 8 years. This can be claimed for capital expenditure incurred on plant and machinery costs.
However, there are several factors that must be met in order to avail of this allowance, such as:
- You must have incurred the expenditure for the purpose of the trade
- The asset must be in use at the end of the accounting period
- The asset must be used wholly and exclusively for the purpose of the trade
What expenses can I not claim?
A number of common business expenses are not eligible for tax relief.
Food is a basic living expense, meaning it is not related to businesses and therefore cannot be claimed as an expense.
Clothing expenses also cannot be claimed – even if they are directly related to the job you are working on. However, if it is you are required to provide your own work uniform or specific safety clothing (hard hats, steel toe boots, etc.) you may be able to claim tax relief.
Entertainment such as treating a client to a night out at a concert or show generally can’t be used as an expense to reduce your tax bill.
What will I need to claim my expenses on my tax return?
It is very important to retain a record of every expense you intend to claim on your tax return.
In fact, you will need to hold on to all relevant receipts and invoices (either physical or digital copies) for up to 6 years.
This is the period of time that you can be selected by Revenue for an audit.
Who can help me with my tax return?
When it comes to filing your tax return, you have two choices.
You can either file your tax return directly with Revenue each year. Alternatively, you can enlist the help of a tax agent, such as Taxback.com, who can help you to file your tax documents.
The main benefit of filing directly yourself is that it is free. However, you will have to deal with all the tricky tax forms on your own. And the burden of ensuring that you have completed your return correctly will lie solely with you.
However, when you file with Taxback.com, you can relax in the knowledge that you are fully tax compliant.
Their tax team will handle all of the paperwork for you and ensure you avail of every tax relief you’re entitled to.
If you have any questions about your tax position or if you would like to know if you can claim a particular expense, you can contact their Live Chat team anytime 24/7.
For more information, visit Taxback.com today.