Limited Company Expenses Guide
GENERAL INFORMATION ON BUSINESS EXPENSES
Allowable expenses are expenses that have been wholly, exclusively and necessarily incurred for the benefit of the company and in the performance of the duties of the director.
Records and receipts should be retained for 6 years in case of a Revenue inspection or audit.
All expenses are subject to revenue approval and are not guaranteed to be accepted.
Business expenses should be paid from your business bank account.
All business related expenses should be included in the expenses sheet we provide you with.
We may ask you to provide us with copies of some receipts for large expenditure. There is no requirement to send us copies of receipts.
You must keep records of all receipts for 6 years.
If you have used your personal bank account for a business related expense this must be included separately on the expenses sheet.
Note: If you are using your personal bank account to pay for business related expenses, in the event of a Revenue audit they are likely to seek records of your personal bank account also.
You must keep the records of all personal expenses for 6 years.
For further information on expenses please see https://www.revenue.ie/en/employing-people/employee-expenses/index.aspx
A benefit-in-kind (BIK) is any non-cash benefit of monetary value that you provide for your employee.
These benefits can also be referred to as notional pay, fringe benefits or perks.
The benefits have monetary value, so they must be treated as taxable income.
You must deduct Pay As You Earn (PAYE), Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) from your employee’s pay on the value of a benefit.
For more information on this please see https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/what-is-benefit-in-kind/index.aspx
Accounting Fees for the company are an allowable expense. Any personal accounting fees are not allowable.
MILEAGE AND TRAVEL EXPENSES:
Mileage is where employees use their private vehicles for business purposes. Reimbursement by the employer in respect of allowable motoring expenses can be made by way of flat rate mileage allowances.
You are not entitled to claim mileage expenses for travel to your home and your normal place of work and vice versa. Only mileage relating to business journeys away from your normal place of work are allowable.
For contractors Revenue will in general not accept that their normal place of work is the home address of the director or registered address of the company. Instead the normal place of work is the clients address. Travel expenses between home and the normal place of work are not an allowable expense and cannot be reimbursed tax free.
You are required to keep records of any mileage expenses including:
Name and Address
Date of business trip
Reason for the trip
Starting point and destination of trip
Engine CC of your vehicle
Please include these details in your expenses claim form and we will include your expense reimbursement on your Payslip for that period.
For more details on mileage expenses for contractors please see link below section 4.9 – Reimbursement of travel and subsistence expenses by intermediaries. https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-01-06.pdf
For details on on civil service mileage rates please see https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/civil-service-rates.aspx
Subsistence is where you perform the duties of your employment while temporarily away from your normal place of work or working abroad on a foreign assignment. Allowable subsistence expenses can be reimbursed tax free.
You will need to keep records and receipts of all subsistence claimed. Please include these details in your expenses claim form and we will include your expense reimbursement on your payslip for that period.
For details on subsistence rates please see https://www.revenue.ie/en/employing-people/employee-expenses/travel-and-subsistence/civil-service-rates.aspx
HOME OFFICE EXPENSES – RENT
The portion of any home rent that you can claim as a business expense should be proportionate to the size of your home office. It is calculated by total square foot versus the total size of your home. This figure should be the same each month unless any physical changes have been made to the property size.
An alternative method for calculation is to claim the additional cost incurred of renting a property where an additional room is essential for a home office. Example – If a two bedroom property was sufficient for personal purposes but you instead rented a three bedroom property due to extra space required for business purposes then it would be acceptable to claim the additional cost of renting a 3 bedroom property over a two bedroom property. If you choose this alternative method, it would be advisable to retain evidence of rent costs of various properties at the time that you started to let your current property.
If you are renting commercial premises which are required wholly for business purposes then this would be deemed an allowable expense.
If you rent a one bedroom property, Revenue are unlikely to accept that you can claim any of your rent as a business expense. This is because a one bedroom property is generally the smallest type of property you can rent. Revenue’s stance is that you would have to incur the cost in full as a personal expense anyway. Another important factor to consider is the actual usage of the home office. There would have to be significant business related activity carried out in the home office to satisfy a genuine claim for home office expenses. The figure you use for rental expense must be deemed a reasonable amount.
If claiming a portion of rent as an expense please include the figure on your expenses claim form as a personal expense if the rent is paid from your personal bank account. This will then be included on your payslip for that period as an expense reimbursement.
HOME OFFICE – UTILITY BILLS (GAS/ELECTRICITY/LIGHT & HEAT)
In order to claim for electricity and gas costs you must establish a reasonable estimate of what your bills would be like if you worked from a different location compared to the increased cost of the bills you incur due to working from home. The difference is the figure you will claim as an expense. It is important that you keep a record of days worked from home and that the figure that you claim is a reasonable amount. This figure may vary each month depending on whether the amount of time you spend working from home each month varies.
If you are claiming a portion of these bills when you only do some work from home in the evenings or weekends, Revenue may claim that you would have been at home anyway and therefore would have incurred little or no extra electricity and gas costs. It is much more difficult to establish that you are incurring extra business related costs where you only work from home in the evenings or at weekends. Consideration must be taken where there are other individuals at home, e.g. spouse/children/housemate. In this case the fact that you work from home may only have marginal effect on increasing the household gas and electricity bills to what they otherwise might be. Therefore you would again have difficulties asserting that you are incurring additional costs for business reasons above those being incurred for non-business reasons already.
If claiming a portion of gas and electricity as an expense please include the figure on your expenses claim form as a personal expense if the Gas & Electricity is paid from your personal bank account. This will then be included on your payslip as an expense reimbursement.
E-WORKER TAX RELIEF
Revenue have specific provisions in place for individuals who wish to claim for home office related expenses under E-Worker Regime. This includes:
Working from home on a full or part time basis
Working for substantial periods of time outside of the employer’s premises or outside of your normal place of work
Logging onto the employer’s computer remotely
Sending and receiving emails, data or files remotely
Developing ideas, products and services remotely
As E-Workers will usually incur certain expenditure while working from home such as additional heating and electricity costs, Revenue allows a flat rate tax expense claim in the amount of €3.20 per day as an alternative to submitting a claim based on the amounts actually incurred.
If claiming a portion of E-Worker tax relief as an expense please include the amount of days worked from home on your expenses claim form as a personal expense. This will then be included on your Payslip as an expense reimbursement.
Client entertainment expenses are not an allowable expense for corporation tax purposes. However, they can be reimbursed to you from the company provided that they meet the criteria above. As the entertainment expenses are not allowable for corporation tax purposes, this would create a profit in the company and that profit will be subject to corporation tax at 12.5%. Records should be kept of location, date, client and relevant details for each client lunch receipt.
The purchase of business clothing or dry cleaning is not an allowable expense by Revenue. Safety clothing e.g. hi-vis jacket or safety boots is an allowable expense.
Lunch can be reimbursed/included as subsistence provided you are working away from your normal place of work due to business reasons. Please see 4. Travel & Mileage expenses for more information on the normal place of work. A detailed log must be kept including date, location, distance involved, client/business and/or reason for journey.
Taxi expenses which meet the criteria above in section 1. General information on business expenses are an allowable expense. However a taxi expenses relating to travelling to and from work is generally not an allowable expense unless it meets certain criteria e.g. working after 10pm or before 6am.
TELEPHONE & INTERNET
Telephone and Internet expenses must be wholly and exclusively incurred in the course of your trade. Where there is a duality of purpose, i.e. you would have incurred the cost personally regardless of any business use, the expense will likely not be allowed by Revenue and extra tax will be payable if you charge these to your business.
If the phone and internet contract is in your company’s name and any personal use is minimal, this is an allowable company expense.
If the phone and internet contract is in your own name, then the amount of phone/internet that is allowable as a business expense is dependent on business use of the phone/internet. E.g. 50% is business use and 50% is personal use.
The purchase of a company car must be done using the company’s business bank account. If there are insufficient funds in the business bank account, you may provide the company with a director’s loan to purchase the vehicle. The vehicle must be registered in the company’s name. There are other options for purchasing a company vehicle such as Hire Purchase/Lease/Business Loan.
With a commercial vehicle there is a BIK of 5% of the original market value. This is calculated on the original market value of the vehicle regardless of whether you purchased a new or second hand vehicle. The BIK is due for the whole period the company owns the vehicle.
Electric Vehicles – there is 0% BIK for all electric vehicles for the 3 year period from 2018-2020. With this option you may buy a fully electric car and not incur any BIK once it is fully electric. There is also a €5000 government grant towards the purchase of an electric vehicle, €120 motor tax band and €600 grant towards a home charging point. For more information on this please see www.seai.ie
WAGES & SALARIES
All wages and salaries of employees of the company are allowable expenses.
Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital expenditures, which are sometimes referred to as capex, can be thought of as the amounts spent to acquire or improve a company’s fixed assets.
Some examples of capital expenditure are the purchase of buildings, machinery, equipment, furniture, fixtures, vehicles, computer information systems, leasehold improvements, etc.
For further information on this please see https://www.revenue.ie/en/companies-and-charities/corporation-tax-for-companies/corporation-tax/capital-allowances-and-deductions.aspx
In computing tax due on your business profits, you do not get any allowance for depreciation of business assets. Instead, you get a capital allowance over several chargeable periods until the cost of the asset has been fully allowed. Capital allowances are generally calculated on the net cost of the business asset or premises. There are different rates available depending on the type of asset. A company can claim capital allowances on:
plant and machinery
transmission capacity rights
specified intangible assets.
A company can claim capital allowances at a rate of:
12.5% over eight years for plant and machinery
4% over 25 years for most industrial buildings.
A company can claim an Accelerated Capital Allowance (ACA) of 100% for the following:
Energy efficient equipment including electric and alternative fuel vehicles
Gas vehicles and refuelling equipment
Equipment in a creche or gym provided by the company to its employees.
The ACA can be claimed in the first year the asset is used in the business.
A company can also claim capital allowances at a rate of 15% over 7 years on the cost of a building used as a creche or gym by its employees.
Subscriptions are deemed to be an allowable expense. 3 conditions must be met to allow a BIK exempt treatment where an employer pays a professional subscription on behalf of an employee, namely:
The duties of the employee require them to be a member of a professional body, and
The employee exercises those duties, and
Membership of the professional body is an indispensable condition of the tenure of employment.
If there is a legal requirement for membership of a professional body, or if there is a requirement for a practising certificate or licence, subscriptions may also be paid to a professional body for an employee without a BIK charge.
This Revenue interpretation continues to apply, and has not changed with the update to the Revenue Tax and Duty Manual last month.
Any concerns regarding the BIK status of our professional subscription will not usually be on the grounds of “wholly” or “exclusively”, but on the grounds of “necessarily” being paid. It is important to be able to show that our membership is an indispensable condition of the tenure of employment if claiming the BIK exempt treatment. Members in business should be particularly mindful of this requirement.
The following are allowable expenses provided they are wholly and exclusively used for business purposes:
RELOCATION AND REMOVAL EXPENSES
The payment of relocation and removal expenses to an employee can be made free of tax, provided certain conditions are met. The payment of these expenses can be made tax free where an:
Employee incurs costs in moving to a new employment location for an existing employer, or
Employee incurs expenses in taking up employment with a new employer.
The conditions to be met to reimburse the expenses tax free are:
The expenses must be reasonable in amount.
Moving house must be necessary in the circumstances.
Payment of the expenses must be properly controlled.
Reimbursement of the expense to the employee must be of actual removal and relocation expenses incurred.
Some of the expenses that can be reimbursed tax free include:
Auctioneer’s fees, solicitor’s fees and stamp duty arising from moving house.
Cost of removal of furniture and effects.
Insurance of furniture and effects in transit or in storage.
Cleaning of stored furniture.
Travelling expenses on removal
Temporary subsistence allowance while looking for accommodation at new location up to a maximum of 10 nights at civil service rates (currently €147 per night)
Rent for temporary accommodation for a period of no more than 3 months.
Receipts will be needed for all expenses. For travel receipts (e.g. flight/train/bus etc) they should have date, destination and contractors name on them. Copy of lease agreement and proof of payment each month will be required for reimbursement of rent.
Must keep a copy of all receipts for 6 years.