Income tax return 2013 - What expenses can I claim

Whether you’re a software developer, a restaurant owner or a physiotherapist you’ll incur costs as a result of running your business. When calculating your tax return this year you will arrive at your ‘profit’ figure by deducting ‘allowable expenses’ from your sales. So the issue of what is and what is not an allowable expense is crucial. The easiest rule to apply is to ask yourself was the expense incurred ‘wholly and exclusively’ for the purposes of your trade. Another way of putting it is that you can claim for any business expense, which you have incurred in order to earn your profits. You can't however claim for non-business or personal items.

What expenses can I claim?

Common expenses directly related to the business are:

• Rent, rates, power and water (business proportion only)
• Motor and travel relating to business (note travel to and from work is not allowable)
• Accountancy fees
• Wages & training costs
• Stationery and phone costs
• Insurance relating to the business
• Postage, stationary and other general office costs relating to the business

What about Capital items?

Buying or improving capital items, such as a van, machinery, business premises, a computer,

fixtures and furniture which last for several years etc… are not business ‘expenses’ for tax

purposes but you may still be able to claim relief for them as long as they are related to your

business.  Capital items need to be shown separately on your Self Assessment tax return, but will also reduce your taxable profits.  In most cases the cost is allowed over 8 years.  However, for certain energy efficient equipment you can claim the full cost in year 1.  A full list of the energy efficient equipment is available on the Sustainable Ireland website.

What expenses can I not claim?

One of the most common items sole traders are surprised to find out they can not claim for is client entertainment. This includes items such as meals, drinks etc.  You can also not claim for things like lunch while you are at your normal place of business. 

You cannot claim motor and travel costs to and from your normal place of business.  Revenue very rarely accept that a persons private house is their normal place of business.  So if you travel most days to a clients premises the Revenue view the clients premises as your normal place of work even though you do not own this premises.

Expenses incurred for both business and private purposes

If you can separate the expenditure between business and private purposes, the business part is allowable. So, if you use a car separately for business and private purposes, the proportion of the expenses that relates to business use is allowable private use is non-allowable.

What records do I need to keep?

Sole traders will tend to have a volume of sales and purchase invoices. They will also have records such as bank statements, wages reports, VAT returns etc.  It is a legal requirement that these records are kept for at least 6 years.

Your local TaxAssist Accountant can take care of your tax affairs and responsibilities, leaving you free to concentrate on your business. Contact us today to find out more about what we can do for you on 1890 987 609

Date published 22 Oct 2013

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.