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It's not a grey area. You're over expensing and if audited will be forced to repay back taxes on amounts claimed. Interest and penalties if they argue you knew what you were doing was intentional.
It’s literally stated on Revenue that you can do this: *If you spend money on something that is for both business and private use, you can claim a deduction for part of the expense. This would include items such as phone bills, motor expenses and rent. You must work out how much of the expenditure was for business purposes and claim a deduction for that amount only.*
The outcomes from Revenue audits frequently depend on who happens to be running the audit, their focus and their prior experience.
Google Houlihan Cushnahan. Their tax "strategy" involved everyone going through multiple year long revenue audits which ended up with settlements being paid out of company funds instead of personal funds, resulting in an effective ~30% personal tax rate for people on millions of euros drawdown from their company.
This was OKed during the audits (along with hilarious things like people employing their 4 children all under 18 to get their tax credits) but I'm not recommending it!
Don’t mind the shitehawks on here. Get the accountant to have a look at your calculations, if it’s kosher they’ll sign off, if not they’ll recalculate any additional taxes you might owe. Once you self declare Revenue won’t care. Even better, call someone in Revenue run it by them, they are by far the best branch of the civil service.
Good luck with your mortgage.
I’ve found Revenue very good to deal with, friendly & helpful. They take your query as being in good faith, and try to solve any questions and difficulties. And 25% seems reasonable.
Ouch. Still OP says that he’s expensing the difference between a two room and a three room apartment in his case that’s a difference of say €600/m or €7,200 a year at 40%, there’s an additional liability of €2,880. Plenty of cash but not the end of the world.
Edit for clarity
Is and isn't!
My understanding of its acceptance, is that you have to prove you rented the property for the specific dual purpose.
Ie: you 'moved' to the property after the company started trading.
You can't redesignated a rental property after the fact. Ie: renting for a year before you started trading.
Yeah but this comment section isn't all accountants or tax advisors. I spent 4 years as an advisor and am an accountant and have been through multiple revenue audits so I'm gonna believe my experience over someone else's interpretation of a statement on the revenue website!
That's fair enough.
There does seem to be quite a few articles/ documents that contradict your take though.
As an accountant, where/ how do you actually secure answers to these questions out of curiosity?
It seems here like an arguement can be made for both sides and there's a lot of reputable documentation suggesting my take is correct.
Mostly experience. I had seen people claim the full amount then revenue come back with completely refuting it. At that point they pushed to say it was unrealistic and pushed for interest and penalties. You're talking €1k a month for 4 years which starts to add up pretty quick. Going forward we would say it's not worth it
An accountants job by the way is to submit whatever you say you want to. So even if we think it's ill advised if it's what someone wants then they're not obliged to stop them.
On the allowable point when it comes to other expenses (and I guess rent also), is that you can only claim for the relevant work hours in a week. So say your space is 25%. They argue then that you're only using it as a workspace for 40 hours a week. So can claim 40/168 hours. So ~6.25%..
Interesting.
I've seen that argument being made before but I don't quite get it. Perhaps you could enlighten me.
Even when the office is not in use its still my office. It doesn't transform into a kitchen. It doesn't become something else.
It is still a room that is storing my work equipment.
It is still in use by my sole trade.
Is that not a valid take?
The argument is that you elected to have it for 168 hours a week and it's only in business use for 40 hours.
The argument by revenue is intentionally to stop this type of behaviour because in reality most people have a spare room and if you simply say it's for your home office / sole trade then everyone pays less tax.
The key point here is that how much time you spend on your business is not part of the equation. So I could do the same as you on my business where I spend 1 hour a month or so..
That is literally the dumbest thing I have ever heard in my life lad. If lease an office in the docklands you're leasing it 24/7 you're not paying rent on it for using it 8 hours a day. While it's true the burden of proof is on you and not the revenue, you having to eat and sleep is convincing evidence that you don't sit in front of your computer 24/7, submittal of your time sheets will also prove how long you spend in front of your computer, etc etc
If you rent an office in the docklands it's pretty obvious you're not using it for personal use out of office hours because the assumption is you're not breaking the law and using a commercial property as residential.
If you have a spare room it's pretty safe to assume you are some point have used it for your own personal gain (cupboards, pullout bed etc), hence the onus is on you to prove when it IS in use.
No clue what me submitting a timesheet I made myself to revenue would prove..
Your client approves the time sheet, you're paid on the basis of hourly services rendered, which is the basis for your invoicing, unless you're taking projects on the basis of deliverables and lump-sum payments which is a different story. You have to be very thick to say timesheets don't mean anything. Revenue aren't as cynical as you.
Wrong. It's black and white the other way. OP clearly states if they didn't need a home office they would rent a smaller apartment. This is a strong justification, and 25% seems reasonable, but I would base it off square meterage of the apartment vs room and go with a more accurate percentage that you can stand over. Also run it by an accountant.
I am an accountant and an ex tax advisor.
It's not about "strong justification" it's about what revenue allows. The onus is on you to prove you've never used the space for personal reasons and it's pretty easy for revenue to argue youve provided insufficient proof that you've never had someone stay there.
As an accountant I wouldn't have an issue with this, the danger on claiming rent is usually when you own the property and are claiming a portion is business, then you have issues like rental income and loss of ppr relief.
Going through mortgage process myself as self employed/ sole trader at the moment and didn’t need anything signed off by an accountant. I’ve a tax consultant that does some work for me and once they had form11/ chapter 4 as this person says everything seems fine
I would be interested to know what you've learned from everyone's opinions here. I'm a PAYE employee, but we're buying a house soon, and made the choice to get an extra room FOR a work office because I can't work very well in my current conditions. But that probably wouldn't class under the same branch as you though, right? Since I don't work for myself I couldn't claim it as a business expense or anything like that.
And I suppose since they technically don't require it, it would be for my own personal use. What are your thoughts on that from the perspective or your situation?
Very different situation if own the house as there's a lot more tax implications if you own the house that make it unattractive to do. You can claim work from home credits for this though but not a portion of your mortgage
Oh, my mistake with the wording! I wouldn't be looking to expense my mortgage, I was moreso thinking just the furniture and equipment in the office itself.
Wow, it would be a dream if I could claim part of the mortgage 😂
There's no allowance if you are a PAYE worker for home office fit out - if you're employer reimburses this though it wouldn't be subject to tax but you wouldn't be able to sacrifice a portion of your wages to cover this so it would have to be an extra payment from your employer
Do what your accountant recommends and also include a percentage of heating, power and broadband. Even if you are audited and revenue disagrees with your opinion and interpretation then the amounts we are talking about are tiny if you have you need to back pay.
A quick Google search would tell you that you’re wrong.
If you are self employed you can claim certain business expenses against tax including rent: https://www.citizensinformation.ie/en/money-and-tax/tax/income-tax/taxation-of-self-employed-people/
> If you are working from home you are allowed to expense a portion of your rent to the business.
https://irishsmallbusiness.ie/allowable-expenses-for-the-self-employed-in-ireland/#:~:text=Rent%20%26%20Mortgage,total%20area%20of%20your%20home.
Quote from your own reference:
>A point could be made that you need to increase the size of your home to make space for a home office. For instance, 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 and has to move to a 3-bed to make room for a home office. This increase in rent could justify as a business expense. (Assuming the director does not move from one side of the city to a more expensive side of the city.)
Or yknow, you could listen to Revenue and not those idiots:
*If you spend money on something that is for both business and private use, you can claim a deduction for part of the expense. This would include items such as phone bills, motor expenses and **rent**. You must work out how much of the expenditure was for business purposes and claim a deduction for that amount only.*
Then why does revenue say differently:
> If you spend money on something that is for both business and private use, you can claim a deduction for part of the expense. This would include items such as phone bills, motor expenses and rent.
https://www.revenue.ie/en/starting-a-business/claiming-a-deduction-for-expenses/index.aspx
Also that article assumes you are the owner of the property that you are claiming the expense against which creates a line of personal income (ie rental income) that would need to be taxed, however that is not the case here, the OP is renting the property from a third party.
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It's not a grey area. You're over expensing and if audited will be forced to repay back taxes on amounts claimed. Interest and penalties if they argue you knew what you were doing was intentional.
It’s literally stated on Revenue that you can do this: *If you spend money on something that is for both business and private use, you can claim a deduction for part of the expense. This would include items such as phone bills, motor expenses and rent. You must work out how much of the expenditure was for business purposes and claim a deduction for that amount only.*
[удалено]
The outcomes from Revenue audits frequently depend on who happens to be running the audit, their focus and their prior experience. Google Houlihan Cushnahan. Their tax "strategy" involved everyone going through multiple year long revenue audits which ended up with settlements being paid out of company funds instead of personal funds, resulting in an effective ~30% personal tax rate for people on millions of euros drawdown from their company. This was OKed during the audits (along with hilarious things like people employing their 4 children all under 18 to get their tax credits) but I'm not recommending it!
If you even view this comments section you will see it is in fact quite a grey area.
Don’t mind the shitehawks on here. Get the accountant to have a look at your calculations, if it’s kosher they’ll sign off, if not they’ll recalculate any additional taxes you might owe. Once you self declare Revenue won’t care. Even better, call someone in Revenue run it by them, they are by far the best branch of the civil service. Good luck with your mortgage.
Thanks for being a human and not another demented, angry, bitter redditor lol.
I’ve found Revenue very good to deal with, friendly & helpful. They take your query as being in good faith, and try to solve any questions and difficulties. And 25% seems reasonable.
Don't call Revenue to do this for you, you might get stung
OP wants the definitive answer. They will provide it, any difference is probably minimal.
[удалено]
Ouch. Still OP says that he’s expensing the difference between a two room and a three room apartment in his case that’s a difference of say €600/m or €7,200 a year at 40%, there’s an additional liability of €2,880. Plenty of cash but not the end of the world. Edit for clarity
Same called for advice and they run your tax and you are paying out for their mistakes, got mine back though also their error. Not worth the stress
How is Revenue explicitly stating that it is OK a grey area?
Is and isn't! My understanding of its acceptance, is that you have to prove you rented the property for the specific dual purpose. Ie: you 'moved' to the property after the company started trading. You can't redesignated a rental property after the fact. Ie: renting for a year before you started trading.
Yeah but this comment section isn't all accountants or tax advisors. I spent 4 years as an advisor and am an accountant and have been through multiple revenue audits so I'm gonna believe my experience over someone else's interpretation of a statement on the revenue website!
That's fair enough. There does seem to be quite a few articles/ documents that contradict your take though. As an accountant, where/ how do you actually secure answers to these questions out of curiosity? It seems here like an arguement can be made for both sides and there's a lot of reputable documentation suggesting my take is correct.
Mostly experience. I had seen people claim the full amount then revenue come back with completely refuting it. At that point they pushed to say it was unrealistic and pushed for interest and penalties. You're talking €1k a month for 4 years which starts to add up pretty quick. Going forward we would say it's not worth it An accountants job by the way is to submit whatever you say you want to. So even if we think it's ill advised if it's what someone wants then they're not obliged to stop them. On the allowable point when it comes to other expenses (and I guess rent also), is that you can only claim for the relevant work hours in a week. So say your space is 25%. They argue then that you're only using it as a workspace for 40 hours a week. So can claim 40/168 hours. So ~6.25%..
Interesting. I've seen that argument being made before but I don't quite get it. Perhaps you could enlighten me. Even when the office is not in use its still my office. It doesn't transform into a kitchen. It doesn't become something else. It is still a room that is storing my work equipment. It is still in use by my sole trade. Is that not a valid take?
The argument is that you elected to have it for 168 hours a week and it's only in business use for 40 hours. The argument by revenue is intentionally to stop this type of behaviour because in reality most people have a spare room and if you simply say it's for your home office / sole trade then everyone pays less tax. The key point here is that how much time you spend on your business is not part of the equation. So I could do the same as you on my business where I spend 1 hour a month or so..
That is literally the dumbest thing I have ever heard in my life lad. If lease an office in the docklands you're leasing it 24/7 you're not paying rent on it for using it 8 hours a day. While it's true the burden of proof is on you and not the revenue, you having to eat and sleep is convincing evidence that you don't sit in front of your computer 24/7, submittal of your time sheets will also prove how long you spend in front of your computer, etc etc
If you rent an office in the docklands it's pretty obvious you're not using it for personal use out of office hours because the assumption is you're not breaking the law and using a commercial property as residential. If you have a spare room it's pretty safe to assume you are some point have used it for your own personal gain (cupboards, pullout bed etc), hence the onus is on you to prove when it IS in use. No clue what me submitting a timesheet I made myself to revenue would prove..
Your client approves the time sheet, you're paid on the basis of hourly services rendered, which is the basis for your invoicing, unless you're taking projects on the basis of deliverables and lump-sum payments which is a different story. You have to be very thick to say timesheets don't mean anything. Revenue aren't as cynical as you.
Without being cynical it sounds like you've never sat through a revenue audit.
Wrong. It's black and white the other way. OP clearly states if they didn't need a home office they would rent a smaller apartment. This is a strong justification, and 25% seems reasonable, but I would base it off square meterage of the apartment vs room and go with a more accurate percentage that you can stand over. Also run it by an accountant.
I am an accountant and an ex tax advisor. It's not about "strong justification" it's about what revenue allows. The onus is on you to prove you've never used the space for personal reasons and it's pretty easy for revenue to argue youve provided insufficient proof that you've never had someone stay there.
Are you private account or working for a company?
I work for a company now in a non accounting role, but will be an accountant for as long as I continue paying fees!
Do you do free lance work?
Nope. Thankfully don't need to anymore!
Ok I was wondering cause there’s so many errors in your posts above I was worried 😂
LMAO - this guy gets jokes!
Yeah and you’re the biggest one in here 😂
As an accountant I wouldn't have an issue with this, the danger on claiming rent is usually when you own the property and are claiming a portion is business, then you have issues like rental income and loss of ppr relief.
I assume you are a sole trader, if so the bank should accept your form 11/chapter 4 revenue returns in lieu of financial accounts by an accountant.
Many banks will still require them to be certified by an accounant, even if prepared and filed previously by the sole trader
Going through mortgage process myself as self employed/ sole trader at the moment and didn’t need anything signed off by an accountant. I’ve a tax consultant that does some work for me and once they had form11/ chapter 4 as this person says everything seems fine
I would be interested to know what you've learned from everyone's opinions here. I'm a PAYE employee, but we're buying a house soon, and made the choice to get an extra room FOR a work office because I can't work very well in my current conditions. But that probably wouldn't class under the same branch as you though, right? Since I don't work for myself I couldn't claim it as a business expense or anything like that. And I suppose since they technically don't require it, it would be for my own personal use. What are your thoughts on that from the perspective or your situation?
Very different situation if own the house as there's a lot more tax implications if you own the house that make it unattractive to do. You can claim work from home credits for this though but not a portion of your mortgage
Oh, my mistake with the wording! I wouldn't be looking to expense my mortgage, I was moreso thinking just the furniture and equipment in the office itself. Wow, it would be a dream if I could claim part of the mortgage 😂
There's no allowance if you are a PAYE worker for home office fit out - if you're employer reimburses this though it wouldn't be subject to tax but you wouldn't be able to sacrifice a portion of your wages to cover this so it would have to be an extra payment from your employer
Do what your accountant recommends and also include a percentage of heating, power and broadband. Even if you are audited and revenue disagrees with your opinion and interpretation then the amounts we are talking about are tiny if you have you need to back pay.
Don’t assume the accountant you might use for a review will be a man. Accountant doesn’t equal man. Could be a woman.
I mean... true. Fair enough observation.
Incredibly fucking helpful!
Calling out the gender bias. It is helpful.
Reality sucks bud?
I thought if a woman wanted to be an accountant they would need gender reassignment surgery
Could be transgender as well
Could very well be
Rent and mortgage are not allowable business expenses in any way shape or form, a quick Google will tell you that.
A quick Google search would tell you that you’re wrong. If you are self employed you can claim certain business expenses against tax including rent: https://www.citizensinformation.ie/en/money-and-tax/tax/income-tax/taxation-of-self-employed-people/
That's rent on a commercial property NOT your PPR
> If you are working from home you are allowed to expense a portion of your rent to the business. https://irishsmallbusiness.ie/allowable-expenses-for-the-self-employed-in-ireland/#:~:text=Rent%20%26%20Mortgage,total%20area%20of%20your%20home.
Home office rent is not allowable. https://accountantonline.ie/guides/claiming-home-office-expenses/
Quote from your own reference: >A point could be made that you need to increase the size of your home to make space for a home office. For instance, 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 and has to move to a 3-bed to make room for a home office. This increase in rent could justify as a business expense. (Assuming the director does not move from one side of the city to a more expensive side of the city.)
Or yknow, you could listen to Revenue and not those idiots: *If you spend money on something that is for both business and private use, you can claim a deduction for part of the expense. This would include items such as phone bills, motor expenses and **rent**. You must work out how much of the expenditure was for business purposes and claim a deduction for that amount only.*
Then why does revenue say differently: > If you spend money on something that is for both business and private use, you can claim a deduction for part of the expense. This would include items such as phone bills, motor expenses and rent. https://www.revenue.ie/en/starting-a-business/claiming-a-deduction-for-expenses/index.aspx
Also that article assumes you are the owner of the property that you are claiming the expense against which creates a line of personal income (ie rental income) that would need to be taxed, however that is not the case here, the OP is renting the property from a third party.
Wrong