If you’re self-employed, for example, own a business or work as a contractor or freelancer, then you can claim the cost of new or secondhand equipment like a computer as a capital allowance.
A capital allowance or deduction lets you write off the cost of an asset over some time. So for example, if you buy furniture or equipment for your office like desks or computers, you can claim these as capital allowances. If you can’t provide the original market value of the equipment or furniture, then you can use the current market value.
A capital expenditure is recorded as an asset, rather than charging it immediately to expense.
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Do I need receipts?
You should always keep a record of the cost in case Revenue comes knocking with an audit, for example, if you buy a secondhand computer off a site like DoneDeal and don’t get a receipt, then you should take a screenshot of the ad in case Revenue ask for evidence of it.
To be regarded as “allowable” for tax purposes, it must be directly related to the running of your business. So any claims you make for the computer in this case must be for business use only.
For example, a printer you use in your home office for business purposes like printing invoices and receipts will qualify.
What can I claim as a capital allowance?
While there’s no approved list of qualifying items of expenditure for capital allowances purposes, examples include:
● Wear and tear allowances claims for qualifying plant and machinery – typically claimed at 12.5% over 8 years
● Industrial buildings allowances claims – at 4% over 25 years
● Energy efficient capital allowances claims – 100% claim in year 1
● Repair expenditure claims
● Motor vehicles
● Computer software
What else can I claim while self-employed?
If you’re self-employed in Ireland, for example, you own a business or work as a freelancer or contractor, there are also several work expenses you can claim to reduce your tax liability that year.
You can claim a deduction on expenses like:
● Rent and bills for your premises
● Your employee’s pay
● Running costs and lease payments for vehicles or machines
● Accountancy fees
● Interest payments for money you borrowed to finance your business
● Protective clothing
● Equipment like a computer or tools for your business
● Phone bills (we suggest you keep separate lines for personal and business use)
● Professional journal subscriptions
You can also claim for expenses you had before your business started trading such as the cost of preparing business plans, course fees and advertising related to the business.
If you spend money on something for both business and personal use, then you can only claim a deduction for the business part of the expense. This might include items such as phone bills, motor expenses and rent.
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Can I claim the use of a car?
You can claim the cost of running a car for your business, for example, fuel and insurance. If you own a car that’s used for both business and personal purposes, then you’re entitled to claim back the percentage of the running costs which relate to business use. Travel from home to work can’t be reclaimed, however, if you travel from one place of work to another location where work is also being carried out temporarily, a portion of this tax may be claimed back. For example, if you’re travelling to meet a client or go to a conference.
Remember to keep records and receipts for all your expenses!
Note: You must always ensure that any expenses are directly related to the running of your business.
A good way of retaining different expenses in your business is to keep a record of them by using the following methods:
● Cashbooks
● Invoices
● Mileage records
● Bank statements
● Receipts for purchases
Certain expenses cannot be reclaimed:
Personal mileage expenses – mileage that is not directly related to business is not claimable
Food and accommodation – Expenditure on food and accommodation because of its nature will always have a dual purpose. However, in practice, such expenditure is only allowable in the following circumstances:
- Hotel accommodation incurred on a business trip with no personal motive for the trip
- Reasonable amounts for expenditure on food included in a bill for allowable hotel accommodation
- Cost of meals incurred where the business by its nature involves travelling e.g. long-distance lorry drivers
Clothing costs – non-safety normal clothing worn to work are non-claimable
Client entertainment – although this may be a business expense, it’s not an allowable deduction for tax purpose
Staff entertainment expenses are deductible as long as they are reasonable
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Filing your tax return
Anyone self-employed must file a tax return by the deadline which is typically around 31 October following the end of the tax year in question. However, the extended deadline for people who pay and file online or through Taxback.com is usually around 15 November i.e. just over 2 weeks after the paper filing deadline.
If you are unsure whether you can or can’t claim an expense, please apply and we’ll tell you exactly what is allowable!
Last Updated on October 2, 2018
