Coffee machine, home office, allowable expense?

Brendan Burgess said:
Is this correct?

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I'm not sure, but I wouldn't be taking it as salary. Company buys coffee machine at a cost of €875 net of tax and anything left goes to corporate investment account within the company.

Also I see someone asking about vat registered. I'm vat exempt so that's a no. Can't claim vat back on diesel either.
 
Bill90. said:
I'm not sure, but I wouldn't be taking it as salary. Company buys coffee machine at a cost of €875 net of tax and anything left goes to corporate investment account within the company.
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If you're just trying to maximise the value of the company, then the rational course is not to buy a coffee machine at all. That maximises the company's retained profits and so the balance in the corporate investment account, and you can just as easily use the existing machine in the kitchen at home. So the whole buy-a-coffee-machine thing makes no sense unless the object is to benefit you, not the company. And therefore we should compare the alternative methods in terms of the value they each confer on you.

What's the worth to you of an extra $1125 in the corporate investment account within the company? The funds are going to come out some day; otherwise they're no use to you. Which means that, if what we're trying to compare is the value to you of the alternative methods of buying the coffee machine, we have to factor in the cost of taking the money out of the company under both options.

One thing that emerges from this is that the amount of the tax deduction is a bit of a red herring. Even if there were no tax deduction at all, you are still €500 better off if the company buys the coffee machine and pays you €1,000 than if it pays you €2,000 and you buy the machine.

One factor that we haven't included is that, if the company pays you and you buy the machine, you own the machine and, when you no longer require it, you can sell it. If the company buys the machine, the residual value accrues to the company. But I'm assuming that the residual value of an 8-year old coffee machine is nil, or as near as makes no difference.
 
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Have you explored pros and cons of expanding your company's business to property management? Engage your company to manage your properties, pay them a fee for this out of your rental income - that fee should be tax deductible from your personal rental income, and ultimately you may be able to take this money out of the company in a more tax-advantageous way to you personally. Just a random thought... may be nonsense :)
 
"that fee should be tax deductible from your personal rental income...ultimately you may be able to take this money out of the company in a more tax-advantageous way to you personally,"

Did you dream that up?

You won't.
 
I had a similar coffee machine expense thought recently..

Is there any list or guidance on allowable expenses? Here or elsewhere.

I would be curious to maximise the business account as I'm both a high rate PAYE and also beginning to bring in business income on the side perhaps 15-50k a year.
 
T McGibney said:
You won't
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What about growing it within the company's investment account and down the line I'd have the option of pension payments, retirement relief? Entrepreneurial relief?

I don't fully understand the above but wouldn't it make sense to shield the profits in a company from the bigger tax rates and utilise whatever may be available 20 or 30 years from now?

Provided I don't need the money in the short term of course.
 
"wouldn't it make sense to shield the profits in a company from the bigger tax rates and utilise whatever may be available 20 or 30 years from now?"

It would were that allowed, but Revenue rules heavily restrict the percentage of rental income that can be absorbed by management charges. The excess is disallowed for tax purposes.
 
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