Company directors are typically considered employees of the company, and their tax returns are subject to the rules for individuals. The process for filing tax for company directors depends on whether the director receives a salary or other benefits, and what business expenses they incur personally that can be claimed
As a company director, you may have personal expenses that are related to the business that can be claimed as deductions or “write-offs” on your tax return. However, there are strict guidelines on what can be claimed.
Claiming Business-Related Expenses as a Company Director
- Salary and Benefits:
- The salary paid to a company director is tax-deductible for the company as an expense.
- For the director, the salary is taxable income and must be declared on the director’s income tax return.
- Pension Contributions:
- Contributions made to a pension scheme are allowable as a tax deduction for the director, within certain limits set by Revenue.
- The company may make contributions to the director’s pension scheme on their behalf, which would be a deductible business expense.
- Business Travel:
- If a director incurs travel expenses for business purposes (e.g., travel to meetings, conferences, or other business events), these expenses may be deducted.
- The director must ensure that the travel is solely for business and not personal. If a trip is partly personal, only the business portion of the travel costs can be written off.
- Common deductible travel expenses include flights, accommodation, meals, taxis, and fuel (if using a personal car for business).
- Home Office Expenses:
- If a director works from home, a portion of their home expenses (e.g., electricity, heating, broadband, and rent/mortgage interest) can be deducted if they are used for business purposes.
- The amount deductible depends on the proportion of the home used for work (e.g., if 25% of the home is used for work, 25% of the household expenses can be written off).
- Professional Fees:
- Fees paid to accountants, legal advisors, and other professionals for services directly related to the business can be claimed as expenses.
- Training and Development:
- Expenses related to training or courses that enhance the director’s professional skills for the business can be written off. However, these must be specifically for business purposes.
- Subscriptions:
- Professional subscriptions or memberships that are related to the director’s work (e.g., subscriptions to business or industry magazines, or membership in professional organizations) can be deducted.
- Capital Allowances:
- For business equipment or property, directors can claim capital allowances, which are a tax relief for the depreciation of the asset over time. This may apply if the company owns assets and the director uses them.
- Interest on Loans:
- Interest paid on loans for business purposes can be written off, but any loans for personal purposes cannot be deducted. Directors must keep clear records of the nature of loans and ensure they relate to the business.
Important points to remember
- Personal vs. Business Expenses: The key to allowable write-offs is that expenses must be solely for business purposes. Mixed-use expenses (e.g., car costs) must be apportioned between personal and business use.
- Proper Documentation: It is essential to maintain receipts and records for all expenses being claimed, as Revenue may request proof if they audit the director’s tax return.
- Director’s Loans: If the director borrows money from the company, this may have tax implications, such as benefits in kind (BIK) or other issues that require careful handling.