Common Expenses and Tax Deductions for Consultants

As a consultant, you’re simultaneously on the move while you share your acquired expertise with businesses of every stripe and size. Along the way, you’re likely to incur some expenses, many of which are VAT-deductible.

This might strike the seasoned pro as obvious, but it’s worth repeating for every independent consultant reading this: If you’re a self-employed professional, no one is making VAT withholdings for you. The silver lining, however, is that you can claim many expenses as deductions, thus lowering your VAT burden.

Also Read: Try QuickBooks Online Accounting Software for South Africa

Transportation Expenses

Getting from Point A to Point H—and everywhere in between—can take a lot of your time as a consultant. That being said, you can deduct trips between meetings and other business-related trips throughout the day. You can’t, however, deduct the commuting portion of your day to or from home.

When it comes to using your personal car or your business’ company car, you have to choose between two methods of deduction: the Cost scale table or the Actual cost. Check out the SARS page on how to maintain a Travel e-log book to claim travel deductions.

Parking and Tolls

Visiting a client for business purposes and finding yourself having to pay for parking? That’s deductible, so are tolls. But if you’re taking a break for lunch for yourself, you cannot expense the parking, since it is not business-related.

Public Transportation

The cost of public transportation is deductible, but must follow the same guidelines as car-related expenses. That is, you can’t deduct the commute to or from home. You can, however, deduct business-related trips made from worksite to worksite.

Deductible Costs of Doing Business

Advertising

You can deduct any materials you use to market your business. This includes not only the flyers and branded promotional items themselves, but also the cost of hiring someone to design and make them for you.

Just remember that “advertising” doesn’t apply to things like gifts, holiday party fare or anything that isn’t branded.

Business Insurance

The cost of insurance premiums related to running your business is entirely deductible. For consultants, this might include something like professional liability insurance or even insurance for your office.

This doesn’t include your own personal health, auto or disability insurance, however.

Cellular Phone Service

Can you hear the taxman now? Well, if you use your personal phone for business purpose, the business-use portion is generally deductible. To get the deductible amount, multiply your phone’s monthly cost by the percentage of time you use it for business purposes.

Contract Labour

If you made payments to independent contractors for things like logo design or content creation, those payments are deductible.

If you’re looking for where to list employee payment deductions, check out the “Wages” section below.

Legal/Professional Services

Professional fees incurred by attorneys, tax preparers, accountants or other professionals can be deducted.

This deduction does not apply, however, to any employees that perform these services for you. They should be included under “Wages.”

Meals for Travel and Entertainment

Meal deductions can be made either within the context of business travel or for entertaining a client. When travelling for business, you can deduct a certain amount of the meal expense, which includes tax and gratuity.

The deduction amount is set by your local tax agency. For more details, visit SARS page on Subsistence allowances and advances.

Supplies and Equipment

Any costs for normal replaceable supplies that you use in the course of your work can be deducted. For consultants, this could apply to common office supplies, such as paper, pens, etc.

Wages

If your consulting business includes employees, then their wages can also generally be deducted. This includes any salaries, commissions or bonuses.

This does not apply to any employee benefits you provide your employees, which can be deducted separately. It also does not apply to any salary you pay yourself.

You’re a consultant, so we won’t tell you how to do one’s job—that’s what you do! Instead, we will stress that as a self-employed person, you should be claiming any legitimate deduction based on the expenses you incur as part of your business.

If you’re hungry for more tips, then visit the QuickBooks South Africa Resource Centre where you will find guides, templates and other bookkeeping and accounting resources.