An overview of self-assessment, including deadlines

Your self-assessment tax return needs to be filed by 31 October 2022.

However, if you’ve signed up to the Revenue Online Service (ROS), you’ll have an additional few weeks to file and pay. In that case, your due date will be 16 November 2022.

If you’re filing for the first time or your business is relatively new, the tax process can be a minefield.

But you can lower your tax bill considerably by taking full advantage of the self-assessment expenses that you can claim.

Hopefully, you’ve been keeping careful records of all of your income and outgoings over the year. Fortunately, there are lots of apps and cloud accounting software packages that will do a lot of the work for you.

In general, expenses that relate to the operation of your business can be claimed – these include stationery, phone and broadband costs, and the cost of running a car – but they must be exclusively for business purposes.

Ensure that you are availing of other credits such as personal tax credits and other expenses such as medical care costs.

A piece of good news for business owners this year: in 2022 the Earned Income Tax Credit, which applies to most self-employed people, is €1,700.

Another effective way to lower your tax bill further is to invest in a pension – the tax-free percentage of your income is age-dependent.

What self-assessment records should you keep?

As a business owner, you’ll need to keep all of the records relevant to your accounts, including invoices, petty cash books, mileage records, and bank statements.

Other documents include receipts for business-related expenditure, including fuel and office supplies.

If you haven’t already done so, send out invoices and follow up on outstanding payments.

Gather your paperwork, including invoices, receipts and bank statements, and request copies of missing documents.

What you need to know about business expenses

When we think of business expenses, some of the items that immediately come to mind are items such as office supplies and stationery, employee wages, car running costs, and phone and broadband charges.

The Revenue Commissioner states that expenses must be “directly related to the running of your business“.

Cormac Fitzgerald, managing partner with accountancy firm Fitzgerald & Partners, says: “In general terms, you can deduct expenses that are relevant to the business.

“What I say to clients is if it’s wholly and exclusively for the purpose of the business, then you can write off that as a business expense.”

The type of expenses depends on the nature of the business, says Fitzgerald.

He adds: “So you have all the utilities, insurance, rates, overheads, phones, trade subscriptions.”

The Revenue website lists the expenses you can claim for your business.

These include:

• The purchase of goods for resale
• Employees’ pay
• Rent and utilities for your business premises
• Running costs and lease payments for vehicles or machinery
• Accountancy fees and interest paid on business loans.

In the case of a startup, pre-trading expenses for the previous three years can be claimed against your first return. Revenue details the type of expenses allowable.

These include accountancy fees, advertising costs, costs incurred in carrying out feasibility studies and preparation of a business plan.

Rent paid for the business premises can also be deductible.

One thing to note: if you’re liable and registered for Value Added Tax (VAT), your expenses claim amount should exclude the VAT portion.

Expenditure on items or services for business and personal use

If you spend money on an item or service that’s for both business and private use, you might be able to claim a deduction for the portion of the expense that is related to the business.

For example, O Connor says if you’re self-employed and running your business from a home office, you may be able to claim a portion of your household bills, such as phone, heating and electricity.

Figuring out which expenses can be claimed isn’t always straightforward.

What about lunches out with clients or that suit you had to buy for a business meeting?

Some confusion exists between business expenses that employees can claim from their employers and expenses that can be claimed against tax.

Here are some of the most common culprits:

• Meals out: Food is considered to be a basic need, so dinner with a client cannot be claimed against tax.
• Clothing: Costs of suits and other clothing purchased to wear at work aren’t allowable. The only exception is protective clothing.
• Mileage expenses: Trips that are not wholly and directly related to the business aren’t claimable.
• Accommodation: Hotel bills are deductible if the trip is exclusively for business.
• Client entertainment: This is another cost that is a business expense but not allowable for tax purposes.
• Staff entertainment: Money spent on Christmas parties or team building days may be deductible as long as they are ‘reasonable’.

While the costs of purchasing or maintaining land, buildings or equipment can’t be written off against your profit, you maybe able to claim capital allowances against this outlay.

@SageAdvice Blog