Business costs when working from home

[a-okadmin]

Hi,

Is there any guide available which lists the type of costs which can be claimed when working from home i.e. what the Inland Revenue will accept? I also need to know how apportion general household costs such as heating, lighting, rent etc.

Any suggestions?

Thanks.

[Joyous]

If you’re self-employed and working from home make a claim based on the number of rooms on your house not including kitchen and bathroom.

So for example if you live in a three bedroomed house with a separate lounge and dining room and you use one of the bedrooms as an office take 1/5 of your household bills. The bills to include are council tax, gas, electricity, mortgage interest, house insurance and any maintenance costs such as cleaning and repairs. If there’s any maintenance/decoration of the business room then claim those costs in full.

Business calls on your home phone bill can be reclaimed although you can’t claim line rental.

When completing your tax return use the “white space” at the back of the form to disclose the basis of your claim.

Regards

Joy

[Ravenfire]

Oh that was a question I was going to ask myself!

[Mwebb]

How does this work if you are a ltd company? working from home of course.

[Joyous]

It gets a bit more complicated with one man band limited companies working from home. Questions arise as to whether you’re an employee of your company in the absence of a contract of employment and whether the expenses are incurred wholly, exclusively and necessarily in the performance of the duties of the employment.

The safest option is to take advantage of the staggeringly generous £2 per week allowed by the revenue :roll: .

A second option is for you to charge your company an amount, i.e. effectively charge your company rent with the amount based on the company’s share of household expenses. You’ll need to draw up an agreement between yourself and the company and declare the resulting rental income on your self assessment return.

Regards

Joy

[Mwebb]

I knew it would be complicated......too late to worry about it this morning...

[a-okadmin]

Thanks Joy.

I hadn't thought of council tax and insurance.

[davenny]

Great comment Joy, I have several clients who work from home and I always advise them to just quickly pick a rent. Quickly go online review the market rent for your area and then do around 90% of whatever the market rent is for the size of space you utilize.

I hate to admit it but I have seen people charge their company hourly rent on the conference table (kitchen table) for annual board meetings.

Erik
http://www.usspin.com
SPiN - Super Powerful Networking has decided to Open Source its system; it is complete free to anyone who wants to start their own mastermind group. (Manuals, Materials, Website, Web-links etc.)

[a-okadmin]

The bills to include are council tax, gas, electricity, mortgage interest, house insurance and any maintenance costs such as cleaning and repairs. If there’s any maintenance/decoration of the business room then claim those costs in full.


Regards

Joy

Hi Joy,

What if your mortgage is capital and interest (repayment)? I pay a fixed rate per month but I can't find any reference to how much is interest and how much is captial. What would you advise in this case?

Thanks a lot.

[Alpha]

Hope Joy doesn't mind me jumping in on this thread as I'm online at the moment.

If your mortgage is an interest only mortgage the whole of your monthly repayment is obviously interest and can be used in the calculation.

If it is a repayment mortgage (mixture of interest and capital being repaid) your mortgage provider will give you a statement at the end of each tax year outlining the payments made and the split between capital and interest.

[Joyous]

Hope Joy doesn't mind me jumping in on this thread as I'm online at the moment.

Certainly not. That’s the whole point of a public forum.

Regards

Joy

[a-okadmin]

Hi Alpha,

Thanks. That's what I thought. I have hunted high and low for the thing but cannot find it anywhere. Oh well, need to carry on searching.

Thanks again.

[Alpha]

Claire

If you cannot find the statement just call the mortgage provider and ask for a copy

[a-okadmin]

Thanks Alpha - I will do that.

On another point, can you claim depreciation against the cost of PC equipment when it is located within the home? I remember reading somewhere that it is classed as an owners asset and therefore can't be claimed. However, I purchased my PC and use it mainly for business. I very rarely use it for anything else. Also what is the best method for calculating depreciation?

Sorry for all the quesyions - as you may have guessed, this is my first tax return!

[Joyous]

Hi Clare

It is possible to charge depreciation on the cost of fixed assets kept in the home. The deciding factor is whether it’s a business asset not where it’s kept. Bear in mind though that depreciation is disallowed when calculating your taxable profits and replaced with capital allowances. I’d therefore not waste your time calculating it (unless you’re preparing formal accounts) and just claim the relevant capital allowance.

Regards

Joy

[a-okadmin]

Hi Joy,

Could you please clarify what you mean by capital allowances? How do you claim these?

Thanks very much.

[Joyous]

Capital allowances are a relief given to businesses that purchase capital assets in the course of trading. They’re given in the form of writing down allowances (WDA’s) and in some cases first year allowances (FYA’s). You claim them as part of your self assessment return. Have a look on page 5 of this (http://www.hmrc.gov.uk/helpsheets/ir222.pdf) for an explanation.

Regards

Joy

[Ravenfire]

Oh no I didnt realise that. I bought my PC specifically for my business and presumed that I could claim for it. Because of the nature of my work would I be able to?

[Joyous]

You can claim for it, Toni. With capital allowances you will eventually claim back the entire cost of the machine but over a number of tax years.

Regards

Joy

[Dizzydiza]

Hi im new to the forum but this thread got my immediate attention as I have just finished doing my accounts ready to submit them to the tax office....i am aware that i can claim 1/4 of my rates, electricity and heating against any profit and although some of my work involves the computer i dont intend to include any depreciation of it as it is also the family computer.....what i want to know is can i claim a percentage of the cost to run my broadband cable...without this connection i cannot keep my website up to date or email my clients or purchase all of the materials i need to keep my business running....i was thinking of putting thru 1/4 of the broadband bill a month...the bill for this also comes on the same bill as my tv and telephone package but again i am not claiming for the house telephone as i use my mobile. The cost of accessing the internet is £25 per month so i want to claim 1/4 of £25.....1) can i do this and 2) is that a reasonable amount to claim
di

[Dizzydiza]

mmmm....i take it i have to take these questions to the tax man...ok thx anyway

[Antonia @limeone.com]

Take some specific advice on capital gains implications before you start to claim the use of your home for business on your accounts as an expense. It pays to consider the other implications of claiming items as an expense in the long term also so use your accountant and lawyer to claim effectively all you can to mitigate your tax bills.

[trondez]

joining this thread because I am just changing my shed/garage in my garden to an office and wondered if I could still claim on the rooms in the house, and could I claim on the fact its costing me £4000 to change into an office... new roof etc.

regard Joy

[Joyous]

Hi Joy

I’m in a similar situation to you in that I work from an office in my back garden as well. I’d say it’s reasonable to treat the office as an additional room in the house, especially if it’s been connected to the mains electricity supply as mine has. Just be sure to disclose the basis of your claim on the white space of your self assessment return (assuming you’re a sole trader).

Regarding the conversion costs unfortunately you won’t be able to claim capital allowances on them as the ‘shed’ will be classed as the premises from which a trade is carried on - therefore no allowances are claimable. However if you can get a separate invoice for things like carpets, blinds, lighting etc they can be classed as fixtures and fittings and capital allowances will be claimable on them. Also if expenditure can be (genuinely) considered a repair rather than an improvement then these are revenue expenses and can be claimed for in full via the profit and loss.

Regards

Joy

[sammie]

Hi clare,
Depending on where you are based i would advise you to go on a "intro to business " course. so you can walk away with written answers you can refer back to.
Rule 1, always understand what you are getting yourself into

Sammie