Deducting expenses

[h20]

I've just spent the past few hours doing my accounts. :-( I’m self-employed and run a services business!
I don’t want to have to hire an accountant, as I’ve actually studied some accountancy before and have a good grasp of how to do a profit and loss account.

However, I do admit I’m a little rusty, so if any of you would be so kind as to answer to my questions or point me in the right direction of a paper or online resource that would be helpful to me. I’ve been bogged down in doing my job so well to win clients that I’ve kind of neglected the financial aspect of things. Now I’m eager to get back on track.

If I understand correctly in order to reduce my income tax burden, I should try to keep my profits down. One way of doing this is by deducting business expenses from my business income. (Are there other ways of reducing profits?) I will be paying income tax at the rate of 20%, as I am self-employed.

I’m not registered for VAT as I’m not in a position to charge higher rates and really don’t want more paperwork, not just yet anyhow.

These are some of the things I would like to write off as business expenditure but not sure if I can write them all off 100% (does it depend on the amount?) All of the following can be justified as being crucial in order to survive/keep up to date in my profession.
Mortgage on an apartment/office in a foreign country
Academic resources, such as books, audiovisual material
Language courses
Cultural visits (cinema, theatre)
Flights/transport to foreign countries to visit clients
Flights/transport to foreign countries for language stays
Further and ongoing education

When making my returns, would all of the receipts for the above have to be in my name for the Revenue or do I actually submit the receipts to the Revenue at all?

I also plan on doing an MBA in 2008 and was wondering if I can write all of this or just some of it off against taxes.
TIA!

 

[capall]

You don;t have to submit recipts to the revenue but you need to keep them in case you get selected for an audit
If an expense relates to your business it is of course deductible
You will only be paying tax at 20% if your income is low enough to keep you at the 20% rate
How would you argue that visits to the cinema theatre is a business expense ?

 

[h20]

You don;t have to submit recipts to the revenue but you need to keep them in case you get selected for an audit
If an expense relates to your business it is of course deductible
You will only be paying tax at 20% if your income is low enough to keep you at the 20% rate
How would you argue that visits to the cinema theatre is a business expense ?

The Revenue site has just answered all my questions!

What expenses can I claim for?
You can claim for any business expenses which you have incurred in order to earn your profits. These expenses are normally referred to as revenue expenditure.

Revenue expenditure is your day to day running costs and covers such items as:

• Purchase of goods for resale
• Wages, rent, rates, repairs, lighting and heating etc.
• Running costs of vehicles or machinery used in the business
• Accountancy fees
• Interest paid on any monies borrowed to finance business expenses/items
• Lease payments on vehicles or machinery used in the business

If you are registered for VAT the expenses you claim should be exclusive of VAT.
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What expenses can’t I claim for?
The general rule is that you cannot claim for any private expenses i.e.

• Any expense, not wholly and exclusively paid for the purposes of the trade or profession
• Any private or domestic expenditure e.g. your own wages, food, clothing (except protective clothing), income tax etc.
• Business entertainment expenditure i.e. the provision of accommodation, food, drink or any other form of hospitality.

You cannot deduct capital expenditure in calculating your taxable profits, however you can claim what are known as capital allowances on certain expenditure.

 

[vector]

>Academic resources, such as books, audiovisual material

Lets say I sell second hand cars, and I buy books from amazon about that subject, and I subscribe to a magazine.

I believe that these outgoings are "wholly and exclusively paid for the purposes of the trade or profession"

however as I am interested in cars, and spend my spare time restoring a classic car in my garden these outgoings could be considered entertainment?

The revenue page, already quoted by another poster continues to say...
"What about expenses which are partly for business and partly private? Where expenditure relates to both business and private use, only that part which relates to your business will be allowed. Examples of such expenditure are rent, electricity, telephone charges etc., where the premises involved is used partly for business and partly for private purposes. These expenses will need to be apportioned to exclude the private use."

So I can claim for these outgoings, but how does one apportion this type of thing?

 

[h20]

>Academic resources, such as books, audiovisual material

Lets say I sell second hand cars, and I buy books from amazon about that subject, and I subscribe to a magazine.

I believe that these outgoings are "wholly and exclusively paid for the purposes of the trade or profession"

however as I am interested in cars, and spend my spare time restoring a classic car in my garden these outgoings could be considered entertainment?

The revenue page, already quoted by another poster continues to say...
"What about expenses which are partly for business and partly private? Where expenditure relates to both business and private use, only that part which relates to your business will be allowed. Examples of such expenditure are rent, electricity, telephone charges etc., where the premises involved is used partly for business and partly for private purposes. These expenses will need to be apportioned to exclude the private use."

So I can claim for these outgoings, but how does one apportion this type of thing?

Yes, but I actually need these subscriptions just for my profession. I think that is justifiable.