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Tax can be a minefield when you’re self-employed, especially when it comes to deductible expenses but some push the envelope a little too far.

The director at Future Focused Accountants, Catriona Knapp, told Nadine Higgins on The Prosperity Project podcast that a business owner once tried to claim a Rolex watch “so that he could get to meetings on time”. That did not fly with his accountant. “We did not claim the Rolex watch!”

Knapp says while any cost that relates to earning business income is potentially claimable, she advises caution. “There’s obviously that propensity for a lot of people to want to claim as much as they possibly can. I always say, ‘Well, you’ve got to be careful of the picture that paints,’ because if the IRD ever come along .. and they think that you are taking the mickey, then they’re going to look harder.”

The rules on deductibility can get confusing as some expenses can be either fully or partially deductible in different circumstances, for example entertainment costs.

Knapp says, “The simple guide from a 50% versus 100% of view is … the 100% is where you cannot choose who enjoys that entertainment … as soon as you’re choosing, then it’s 50%.”

Things can also get murky when costs are not solely for the business but have a private benefit as well, which is where Knapp advises to only “claim whatever portion that you can justify that relates to your taxable activity”.

Home office expenses are also a claimable expense, but there are limits - Knapp suggests thinking of what you’d pay if you rented business premises. “So, if you’ve got to repair parts of the home, if you’ve got a repaint it, your rates, your insurance, you can claim a portion of that, but you can’t claim the pool guy, you can’t claim the landscaping ... you wouldn’t be charged that in a commercial environment.”

And she says be careful with cars: “It’s a very hot topic with the IRD … that is not an area to push the boundaries.”

Listen to the full episode of The Prosperity Project for more

The podcast is hosted by Nadine Higgins, an experienced broadcaster and a financial adviser at Enable Me.

You can follow the podcast at , , , or wherever you get your podcasts. New episodes are released every Monday.