8 ways to reduce your Irish Corporation Tax bill
Nobody likes paying tax and whilst we would never advocate doing anything shady or underhand to reduce the amount you pay, there are legitimate ways that you can reduce your Irish corporation tax burden. In this article, we’re looking at some of the more common methods of reducing what you pay to The Revenue and giving you some tips on ways that you can keep hold of your cash. It’s important to remember though that tax law can be incredibly complex at times and so we’d always suggest that you speak with a specialist in Irish tax law to make sure that you aren’t inadvertently making a mistake.
#1 Claiming all your business expensesThis is the first stop for anyone who wants to reduce their corporation tax bill and it is the easiest to do. You must make sure that you are claiming correctly for all of the expenses that your business incurs and it is surprising that many business owners don’t actually do this. It’s a simple matter of making sure that you save copies of all invoices and receipts, ensure that anything paid for personally on behalf of the business (such as on your credit card) is claimed back and that you make use of any limits or allowances. Any business can do this and it is just a matter of ensuring that you have very good bookkeeping and an organised bookkeeper. Make sure you have a periodic review of payments you may have made from your personal bank accounts, credit cards and things like PayPal and then put in an expenses claim with your company. You’ll then be reimbursed tax-free and your company can claim the expense against its corporation tax bill, but do make sure that the spending is for business purposes!
#2 Investing in your businessCompanies are allowed to reduce their tax bill for amounts that they invest for future growth. The Revenue allows companies to claim back a percentage of their spending on assets that have a life that is longer than a year (called capital a capital allowance).
Normally people think of capital allowances as just applying to plant and machinery but actually, there is a long list of things that you can claim for including;
- Plant and Machinery
- Software and systems
- Intangible assets (such as patents, copyrights and trademarks)
#3 Pension contributionsFor some time now the government has wanted to encourage people to put money away for their retirement and one of the ways that they do this is by making pension contributions tax-deductible. The payment into a pension is classified as a business expense and as such is fully tax-deductible however there are rules about how much you are allowed to pay in. Generally speaking, you can build a pension fund that will provide up to two-thirds of your final salary and directors are limited to total contributions of €2,000,000. Your contributions are also limited using a scale based on your age, gender and a variety of other factors determined by The Revenue. As with all things pensions, you do need to make sure you take advice from a properly qualified person before you make any commitments.
#4 R&D tax creditsIn a similar vein to capital allowances, companies investing in the future growth of their company through Research and Development can claim R&D tax credits. The good news is that if your company isn’t making a profit at the moment, you can apply for the credits to be released to you in future years as your business starts to feel the benefit of your new development. Companies can only claim R&D tax credits if they fall within the tax regime in Ireland, they carry out R&D activities in Ireland or the EEA and where they haven’t claimed an allowance in another country. R&D tax credits are designed to reward businesses that are seeking to make strides in scientific and technological change including experimental activities, basic or applied research or resolving specific technological issues.
#5 Claiming for lossesClaimable losses can either be losses that you have incurred during the current year such as bad debts or past overall losses of the business. If you have a sincerely held belief that the prospect of collecting a debt is nil then it is possible to claim this against corporation tax and claim back any VAT charged (and paid over) on the invoice. If your company has made losses in previous years it is possible to claim these against future years profits without a time limit and if you make a loss in the current year you can even claim against the prior tax year’s profits.
#6 Advance expenditureIf your business is making a healthy profit in the current year then you can choose to bring forward certain types of expenditure to reduce your current year tax bill.
The types of costs include;
- Building maintenance, repairs and redecorating
- Advertising and marketing campaigns
- Redundancy and closure costs