Spliting rent and business costs in a home office

[seo_uk]

Hello there

I am operating a limited company from a home office. The other day I had a meeting with my accountant who said that I needed to think about how much I use my property for business and how much for personal to sort out the amount of rent I can run through the business.

I am not sure what the usual procedure for calculating this cost, but a small bit of research has indicated that it is quite often measured on space. Is this the case? Is there other ways of doing this.

The company is an internet marketing business, with 2 desks in the lounge area of our flat. Any advice would be greatly received. :)

[Zeno]

It is usually measured in rooms exluding halls & bathrooms but be aware this most often applies to a sole trader calculating a use of home allowance.

As the director of a limited company, any rent you charge will be taxable on you personally.

Should you not be asking your accountant incidently?

[elainec100@cheapaccounting]

see these links:

Use of home as office - if you are a director

http://www.hmrc.gov.uk/manuals/eimanual/EIM32760.htm

Use of home as office - sole trader (self employed)

http://www.hmrc.gov.uk/manuals/bimmanual/BIM47800.htm

[seo_uk]

Yes, you are probably right, but she wasn't completely sure on the best way to calculate it, so suggested I looked into it a bit. I just wondered if anyone else was doing something similar or had done it in the past.

[elainec100@cheapaccounting]

Yes, you are probably right, but she wasn't completely sure on the best way to calculate it, so suggested I looked into it a bit. I just wondered if anyone else was doing something similar or had done it in the past.

I would suggest she looks into it - that is what you are paying her for :rolleyes::rolleyes:

This is very common place and I am a little shocked that your accountant could not easily dig these references up. :p

[seo_uk]

well, thats fair enough, but I have looked through both links and they are not exactly what I was looking for. My accountant could probably find out the answers, but as I have found on here (UKBF) before, there is always a few little things you can find out that my accountant would never know. I don't mean dodgy stuff, just first hand experience that always goes a long way.

[elainec100@cheapaccounting]

So what was it that you were looking for?

Speaking just for myself I can only advise clients on how to operate their business finances based upon tax, company law etc. Anything else would be illegal and unethical - so I may not be be the best person to help as all I can do is give you the guidance on what you are able to claim.

Goos luck with searching :)

[seo_uk]

I just know there is always more than one way to skin a cat and if there is a better way of doing it then just working out space used by our desks then I was hoping to find out. I wasnt looking for some tax loophole, that could get me out of paying my way.

It doesnt mater anyway, I will give HMRC a ring later today and get some advice on it.

Thanks to all that offered advice.

[Jenni384]

The usual formula I use is along the lines of:
total house costs x 1/5 (1 room out of 5, for example) x 5/7 (days in the week) x 48/52 (weeks in the year). The fewer rooms you have in your house (bedrooms/reception, exclude kitchen/bathroom/hallways) the more beneficial it works out.

[seo_uk]

Thanks Jenni

That seems like a good formula.

:)

[stphnstevey]

http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=177635&d=1025&h=1019&f=1026&dateformat=%25o%20%25B%20%25Y (http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=177635&d=1025&h=1019&f=1026&dateformat=%25o%20%25B%20%25Y)
(http://www.hmrc.gov.uk/manuals/bimmanual/bim37000.htm)
http://www.hmrc.gov.uk/manuals/eimanual/EIM32760.htm (http://www.hmrc.gov.uk/manuals/eimanual/EIM32760.htm)
(note, the manual has several pages, bottom right for nxt page)
(http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=177635&d=1025&h=1019&f=1026&dateformat=%25o%20%25B%20%25Y)
Might help you. The HMRC site has some examples about how to work it out here

http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm (http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm)

Looks like there are several ways, so pick the most benificial to you I guess.

Wondering if you can make an annual claim (it would save on paperwork for me)?

[Jenni384]

(http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=177635&d=1025&h=1019&f=1026&dateformat=%25o%20%25B%20%25Y)
Wondering if you can make an annual claim (it would save on paperwork for me)?
I always do one annual journal. No need to do it weekly or monthly.

[stphnstevey]

I read this in an article on this subject:

Best way is for Company to pay the Director rent for use of the house as office. The Director has to declare the rental income on his pers tax return but can then deduct a proportion of expenses as per the above article.

Can anyone explain why this would be the beneficial to do it that way?

[stphnstevey]

Can a normal employee claim rent/mortgage, council tax, electric, gas, water as a company can?