What exactly is a business expense?
A business expense (or "tax write-off") is an expense that you can deduct from your taxable income. You take the amount of the expense and subtract that from your taxable income. Essentially, tax write-offs allow you to pay a smaller tax bill, but the expense has to fit Revenue's criteria of a tax deduction.
Why should I claim business expenses?
If you run your own business, then it's useful to understand what business expenditures you can claim for as allowable expenses.
Recording your expenses allows you to:
- Understand the financial health of your business more accurately.
- Reduce your tax bill.
Will I get my expenses back from Revenue?
This is a really common question, but sadly the answer is no! 'Claiming' expenses does make it sound like you'll be reimbursed for what you spend – but this is not the case.
Instead, you deduct your expenses from your business income to reduce the amount of profit.
Your tax bill is worked out based on your profits, so including everything you spend money on shows your actual profit, which means you will pay less tax.
Common business expenses
Different types of business will have different types of expenditure. For example, a taxi driver will have weekly settle fees, and a plumber will have tools and material costs.
The good news is that most business expenditure is allowable, so you can claim for it on your tax return. Even expenses you have incurred personally for the business are generally allowable too.
The list might include:
Expense claims that cause confusion
Some types of expenses seem more confusing than others, so we'll try to answer some of the most frequently asked expense questions.
Motor expenses
If you have a commercial vehicle, then you can normally claim the whole purchase price, as well as all the running costs.
If you have a car and it's not solely used for business, then it's a bit different.
- If you're a sole trader, you will need to apply for a private use percentage so that you don't claim for the proportion of the costs which relate to personal use.
- If you have a company, then it's usually better to own the car personally, and then charge business mileage to the company.
Using your home as an office
There are a few ways to claim expenses if you use your home as an office. You can choose to claim the basic allowance, or you can apportion your household costs according to the floor area the home office takes up.
Training costs
You can claim training costs as an expense if it's to top up your skills. Training to qualify for something or to gain new skills is not allowable.
However, if you have employees that are training to qualify for skills relevant to your business, then this is allowable.
Travel and subsistence expenses
Travel and subsistence costs, such as train fares, food, and hotel costs, are generally only allowable if you are not commuting to a permanent place of work.
This area can get complex, so please speak to your dedicated accountant for more details!
The bottom line
Expensing through your business is an essential way to minimize the amount of tax you have to pay, and good record keeping will ensure you get to keep those deductions if Revenue ever comes knocking.
Have your team of dedicated bookkeepers at GA & Co track all the expenses related to running your business to ensure you're taking advantage of every legitimate deduction.
Still have questions?
Sometimes it's better to talk to an expert. Book your free consultation with one of our small business experts now.
Book Consultation
