Sole Trader Expenses – What is NOT allowable
Let’s get clear!
Revenue are very clear on the fact that, as a sole trader, you CAN NOT claim for certain food / travel expenses. Yet I have the same conversation time and again with various new clients or just general queries.
The rules for employees and companies are different. When you hear what others can claim in their business, their circumstances may be different too, so do not rely on talk from colleagues or friends. Knowing what Revenue will allow as business expenses is the best way to protect yourself and your business.
Of course, I sound like the bad guy. Who wants to be the one to tell anyone that they must pay more tax? I don’t work for Revenue. I work for my clients. The job is to ensure they know what they can and can’t claim as deductible expenses. If anyone is to have a Revenue inspection, the last thing to find out at that late stage is that something claimed was incorrect. So, we discuss these things upfront.
SOLE TRADER – FOOD EXPENSES
Firstly, let’s look at FOOD (or coffees, drinks or meals).
Revenue are crystal clear on the fact that it is rare you will have food or coffees as a business expense.
Revenue refer to ‘duality of purpose’. You need food to live (so they don’t see it as a business expense in most cases). Sorry, that cup of coffee meeting a client is just not an allowable expense.
The guide and principles page is very short and very clear. Have a read here.
SOLE TRADER – TRAVEL ‘FOR BUSINESS’ VERSUS ‘TO BUSINESS’
Next, we’ll look at TRAVEL.
Again, Revenue are very clear in the principle section of this short manual. Know the difference between ‘travelling for work’ and ‘travelling to work’.
You know your own business best. When I talk to clients about their business it’s very clear that they are travelling to perform work (and not travelling for work). The more you know about these principles and the clearer you become, the better. You know what you claim and can’t claim. You know what you can count as a business expense and what your profit level is (what your taxable income is and what you should hold back for taxes each month). You don’t have to rely on anyone’s opinions. Rely on the facts. The facts are the principles Revenue will use if you are audited.
See the principles for travel for sole trader here.
COMPANIES AND EMPLOYEES
Revenue will use different criteria for employees. This series of articles will focus on sole traders initially and we’ll move to employees in the coming weeks. Stay tuned.
There are so many benefits to learning the basic principles. To name a few:
– Learning more makes you feel empowered around your finances.
– Saving for your tax bill ensures no nasty surprises. Knowing what tax is due early also allows you to set aside money for pension or long terms savings. More importantly, you know exactly what money is YOURS at the end of the day!
– You do not have to rely on conflicting advice. You don’t have to argue with other ‘opinions’, you have facts.
– If you have an audit from Revenue, there will be no nasty surprises. They come and go quickly!
I could go on…. but I won’t. It’s Monday morning and I’m sure we’ve all a lot more to do today! For more information or if you have any questions, feel free to get in touch.
Note – General principles above. These may be different for your specific work (if for example you drive for a living or run a taxi). Be sure to read the facts and then discuss your own circumstances with your advisor. You should always take advice in relation to your own situation from a qualified professional.
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Have a great week
[25 February 2019]