Contracting Expenses: What Can I Claim? [Webinar Transcript]
This webinar, “Contracting Expenses: What Can I Claim”, is the first of a four-part series focusing on contracting in 2022. In this session, Tony Tynan – the Operations Director at Berkley – is joined by Sean Piggott – Business Development Manager at Icon Accounting.
Webinar Transcript
What is a Business Expense?
According to Revenue, a business expense is an expense that is directly related to the running of your business. The expense is “wholly and exclusively for the purpose of your trade”. In other words, you would not incur this expense if you didn’t operate as an Independent Professional.
Rules, regulations and guidelines relating to business expenses come directly from the Revenue. If your accountant is pushing back an expense that you’re trying to claim, it’s not because they’re trying to be difficult, rather, it’s because they know that the expense is not allowable based on the Revenue’s own guidelines.
Expenses You Can Claim When Starting Your Contract Role
Relocation Expenses
One of the most fruitful expenses that can be claimed when considering a Contract opportunity is Relocation Expenses. It is worth noting that to be eligible for this expense, you must travel a minimum distance of 100km for your contracting opportunity.
Relocation Expenses can include:
- Initial travel to a new location.
- 10 nights stay in accommodation if no rental accommodation has been arranged before relocation – €147 per night subsistence.
- 3 months rental accommodation costs (Lease Agreement or Landlord PPS number required).
- Removal/Storage/Transfer costs for your belongings.
- If you are married/civil partnership and your partner/family is relocating, the cost of their relocation can also be deducted as a business expense.
Equipment Expenses
If you require new equipment for your contract opportunity, you can claim business equipment as a business expense. Examples of business equipment may include:
- Laptop/computer
- Mobile phone
- Desk/chair
- Other home office equipment
*All significant expenses (i.e. of a value equal to or over €250) need to be purchased/invoiced under the company name.
Expenses You Can Claim Throughout Your Contract Role
Working From Home Expenses
Many Independent Professionals perform duties whilst working from home and as a result, are entitled to claim for expenses derived as a result.
Common examples include;
- Mobile Phone Usage: If you use the same phone for personal and professional purposes, then you can claim 50% of the bill as a business expense. However, if you have a dedicated work phone, then you can claim 100% of your phone bill.
- Electricity/Internet – Approx. 50%
- OR E-Workers Allowance – €3.20 per day
Professional Subscription Expenses
Contractors often require professional subscriptions in order to carry out their duties assigned as part of the assignment schedule.
Examples can vary depending on the role and profession but, common examples include;
- Professional memberships e.g ACCA
- Software subscriptions e.g Adobe
- Textbooks may be claimed and reimbursed, provided they are related to your role
Please note that the subscription in question must be related in some way to your contract role.
Mileage & Subsistence
This is an area where Revenue is particularly stringent and it is under constant review.
Independent Professionals may be entitled to claim mileage and subsistence in certain circumstances, however, the travel should not be to and from the nominal place of work. Instead, mileage can be claimed in some instances such as those below;
- Off-site meetings/training
- Meeting clients away from the nominal place of work
For a more detailed discussion on mileage and subsistence, take a look at Icon’s dedicated Guide, “Claiming Mileage and Subsistence as an Independent Professional Contractor in 2022”.
Upskilling & Training
The most experienced Independent Professionals, commonly recognised as ‘career-contractors’ will often partake in regular up-skilling courses to continue adding to their list of existing skills and expertise.
Courses, certifications and other up-skilling costs can be claimed when the course is related to your contract opportunity.
Non-work related qualifications aren’t eligible for reimbursement.
Other Expenses Contractors Can Take Advantage Of!
Small Benefit Exemption Scheme
Under the Small Benefit Exemption Scheme, Professional Contractors who operate through their own Personal Limited Company or an Umbrella Company can receive a non-cash payment of up to €500 each year, absolutely tax-free!
Keep the below in mind;
- The full €500 spend must be made in a single purchase
- Make sure it is in the company name!
Pension Contributions & Income Protection
Pension Contributions and Income Protection are one of if not, the most popular expenses for Independent Professionals for a variety of reasons.
Pension Contributions
If you’re a Company Director, you can qualify for an Executive Pension Plan (EPP). A standard PRSA pension offers 40% tax relief, but if you contribute to an Executive Pension it is effectively saving you tax at 52%. Put simply, you’re safeguarding more of your income for the future rather than giving it to the taxman. To learn more about setting up a pension as a contractor, watch our dedicated webinar “Pensions for Contractors.”
Income Protection
Income protection provides you with a regular income, which is paid out if you cannot work due to medium or long-term illness or injury. It is designed to supplement some of your earned income if, due to illness or injury, you cannot earn an income yourself. It is a good way to safeguard your income to a certain threshold should you become ill, or unable to work.
Many Independent Professionals in the Irish market operate as Umbrella or PLC Company Directors and make Class S PRSI contributions. However, this class doesn’t cover illness benefits.
By setting up an Income Protection policy, you can safeguard up to 75% of your income. Not only is it tax-efficient to take advantage of it but it also increases the amount of income you can earn should you become ill/injured/unable to work. It’s a great way to reduce your tax liability while also ensuring that you’re covered in the worst-case scenario.
Tax Saver Ticket
The Tax Saver Commuter Ticket Scheme is an incentive for workers to use public transport. You can avail of public transport commuter tickets if you are travelling for work by public transport whether that be by bus, rail or LUAS. There are several different types of monthly and annual tickets available. To find out the most suitable ticket for you, talk to your accountant today.
Bike2Work
The aim of this incentive is to encourage workers to cycle to work and the cost will not be a taxable benefit-in-kind (BIK).
- The limit for traditional pedal bikes including safety equipment was €1000 and was then increased to €1250.
- For e-bikes and related safety equipment, the limit is €1,500.
- This scheme can be utilised once every 4 years.
An Example of Claiming Expenses Can Impact Your Payslip
Example 1: In the below payslip, the contractor is charging a day rate of €350 and has not applied any expenses outside of the Management Fee.
Example 2: In the below payslip, the contractor is charging a day rate of €350 and has applied €300 of expenses in addition to the Management Fee.
Example 3: In the below payslip, the contractor is charging a day rate of €350 and has applied €300 of expenses in addition to the Management Fee. They have also contributed €400 towards an Executive Pension Plan.
Sean’s Top 3 Tips for Contractors Claiming Expenses
- If you are ever unsure if you can claim an item as a business expense, always reach out to your accountant before committing to a purchase!
- Remember to get the purchase in the company name, especially substantial purchases of €250+.
- Make the most of tax efficiencies where possible, particularly pension contributions, income protection and anything that can safeguard/benefit your future at the same time as reducing your tax liability!
Liked This? You Might Also Like Our Webinar “The Right Time to Move | From Umbrella Company to Your Own Personal Limited Company”
If you’re interested in learning more about how to maximise your take-home pay as a contractor, why not watch our webinar “Right Time to Move | From Umbrella Company to your own Personal Limited Company.”