What expenses can I claim?
You are entitled to claim home office expenses if you are a business owner or Director working from home. These expenses can reduce the amount of tax you pay at the end of the year when calculated into your tax return.
There are certain conditions around expenses so we recommend that you speak to your accountant about the expenses you wish to claim. Your accountant will calculate the allowable amount of business expenses that you can enter into your tax return.
In this guide, we go through some examples of what home office expenses you can claim as a business owner/Director.
Claiming home office expenses
Home office expenses fall under the term “business expenses”, which must be wholly and exclusively for the purpose of the business. But how do you differentiate what is used for personal and business purposes in your home?
Firstly, there is no need to have two separate bills. In general, you need to estimate the percentage of the reasonable business use and then you can claim that amount as a business expense.
Secondly, you need to ensure that proper records are maintained for the expenses used for business purposes.
We go through examples of these below but if you would like specific advice on claiming expenses, get in touch with our Client Services Team who are always happy to help with queries.
Telephone and broadband
If you are using your home phone or personal mobile phone as a business phone, you can claim a percentage of this as a business expense. You need to estimate the amount of time you use your phone for business and calculate a percentage of the business use. Once you have worked out a reasonable amount, you can claim this as a business expense in your tax return.
Alternatively, you could purchase a phone through the business and claim this as a business expense.
In the case of having a phone with an unlimited usage plan, you may be entitled to claim the whole cost as a business expense. If you use the mobile to make business calls throughout the day and personal calls during the evening, the whole cost of the phone could be deemed a business expense. However, this is only an allowable expense if the personal calls are not costing the business any additional costs.
The great thing about having an accountant is that you can seek their advice on how to save costs in your business. Our accountants have experience working with Startups who start a business in their home office.
Furnishing your home office
Purchasing equipment that is essential for your business duties is deemed an allowable business expense. This can be a laptop, printer, chairs, tables, stationery, etc.
Revenue states that if a company provides a telephone, broadband or furniture to fit your home office, there are no additional charges if there is incidental private use. This means that you are allowed to use these items during non-business hours as long as they are considered to be reasonable business expenses in the first instance.
For example, it may be difficult to justify claiming an expensive sofa bed in your home office as a business expense. This is because it is more likely the sofa bed will be used privately rather than during business hours.
Speaking to an accountant can clarify what you can claim as a business expense in your home office. We’re delighted to host a range of Startup Masterclasses where you can seek further advice on important topics for Startups. We host a live Startup Masterclass Webinar on What Expenses Can I Claim To Help Reduce My Tax Bill and you can register for it now.
Claiming part of your mortgage or rent for your home office
Home rent is usually not an allowable business expense
Renting your home is deemed a necessity for personal use - i.e. if the business didn’t exist, you would still need to incur the expense of renting a home.
One of our accountants Tom, states that it is not recommended to claim rent expenses against the business when you own your home. This could expose you to having to pay personal income tax on these rent payments from the company into your pocket. You may also have issues with Capital Gains Tax when it comes to selling your property. This means that there are generally no tax benefits to claiming rent as a business expense when you own your home.
On the other hand...
It can be argued that you need to increase the size of your home to make space for a home office. I.e. you need to rent a larger home so you have space to run your business in an office. For example, if a Director currently lives in a 2 bed apartment and has to move to a 3 bed apartment to make room for a home office, then the increase in rent could justify as a business expense. Our accountant Tom points out that this is assuming the Director does not move from one side of the city to a more expensive side of the city.
We recommend you ask your accountant before you claim rent as a business expense as they can give you more specific information that is relevant to your company,Talk To Us
Example of using rent as an business expense
Tom gives us an example of what may happen if you enter a €5,000 expense in your company accounts when you claim rent as a business expense:
Firstly, you’ll need to report this in your Directors Return (Form 11) as personal income. Then if you own the property and later want to sell it, you may lose part of your Principal Private Residence (PPR) relief. This is because Revenue will look for tax on any profit related to non-personal use of the property. In other words, you need to pay tax on the rent you received from your company.
Working from home allowance
Employers are allowed to make tax-free payments of €3.20 per day
Revenue recognises that working from home will incur certain household expenditures, such as light and heating. Employers are allowed to make payments up to €3.20 per day (2020) to Directors/employees. Income taxes such as PAYE, PRSI, and USC are not deducted from this type of payment. This payment is on top of Directors/employees making specific business expenses, such as those mentioned above.
This concept is also known as e-working
- Working at home on a full or part-time basis
- Work taking place partly at home and in the business office
- Working while on the move, i.e. in different locations, and making occasional visits to the business office
Irish Revenue understands that a certain element of cars, whether purchased through the company or not, may be used for both business and personal use. What's important to remember is that the amount that is used for business is reported correctly and accurately to Irish Revenue.
Here are some examples of calculating motor expenses:
Personal car used for business travel
If you are using your personal vehicle for business travel, then you can claim back a rate per business kilometre travelled. These rates are set out by Irish Revenue and they’re called Civil Service Rates. These apply to all employees who use their own car for business travel. The rate will depend on the total kilometres driven and the engine size of the vehicle. The amount spent on business travel can then be claimed against your tax bill at the end of the year. Employees and Directors of Limited Companies can avail of Civil Service Rates and it is good to note that Sole Traders cannot avail of this.
Company car used for personal travel
The second scenario is if your company owns the vehicle and the company pays for all running expenses of that vehicle. In this case, if you use the company vehicle for personal use, you may be liable for Benefit In Kind (BIK).
BIK is tax on personal benefit or personal use of a vehicle that has been provided to you by the company. These benefits can also be referred to as notional pay, fringe benefits or perks. BIK taxes include PAYE, PRSI and USC and the rate depends on the original market value of the car.
For example, if you have a company car and you use it for personal travel in the evenings to a value up to €500 per month; you are liable to pay BIK (PAYE, PRSI and USC) on that €500.
Revenue guidelines state that there is no BIK applied to any private use of an electric company car or van that’s worth less than €50,000. This exemption is for electric cars or vans only – it does not apply to hybrid engine cars and applies to both new and used electric company cars.
Speak to an accountant
As you can see it is quite confusing trying to calculate a motor expenses for a company. This is why we recommend speaking to an accountant who can take care of these calculations for you. Get in touch with our expert Client Services team to discuss your accounting requirements.
Talk to us about claiming other expenses
Do you have questions about claiming expenses in your company? Our accountants can take care of your accounting and compliance requirements to ensure you are compliant with Irish Revenue and the Companies Registration Office (CRO).
If you would like to quote for our accounting services, please get in touch with our Client Services Team. You can call us on +353 1 905 9364 or email on firstname.lastname@example.org.
You can also register for our Startup Masterclass which is hosted by Chartered Accountant, Tom Francis. Find out more about our Expenses Startup Masterclass event.