Working from Garage - Tax relief

[Marco66]

Hi,

Working in the service sector I work from home in our converted garage which is now my workshop.

Slightly confused over the ratio of bills I can claim for water / elec / rates etc.

Our house has 3 beds, 2 rooms downstairs + kitchen. Also a bathroom.

Am I right in thinking I claim a 5% of the total cost - or it a 6% ?? Not clear with the garage being in addition (separate building to the house).

Any help appreciated !

 

[Scalloway]

I suggest having a look at this.

http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

 

[Marco66]

Thanks Scalloway - I have already seen this but still find it a little unclear.
Just wondered if there was a typical value. Based on the house having 5 main rooms I thought it might be a fifth of the cost.

Wondered if anyone else had any suggestions based on what they claim. FYI - the garage is in use around 8 hrs a day+.

 

[faradaykeynes]

Any extra expenses you are incurring bcaz of having running business from home, either room in house or garage, that should be accounted for. e.g if you have broadband at home before business and same is used for business as well then i dont see any reason for factoring broadband cost in business expenses at all. On other hand extra light and heat is example of business cost

 

[Marco66]

Thanks for your input faraday - doesn't actually answer my question though ??

In reference to claiming for broadband - my accountant informed me I can claim 50% as used for business purposes - same with landline standing charge and some calls as used for business.

 

[faradaykeynes]

I have seen some bizarre advices on use of home which are clearly against the guideline by HMRC and as a result some ridiculous figures in P&l.
I just tried to give you an example to workout logical amount for work from home. If you have broadband at home, it does not matter you use it for business or not you will have to pay for it any way so its not costing you any thing extra for the fact business use is there too

 

[MrAnchovy]

I have seen some bizarre advices on use of home which are clearly against the guideline by HMRC and as a result some ridiculous figures in P&l.
I just tried to give you an example to workout logical amount for work from home. If you have broadband at home, it does not matter you use it for business or not you will have to pay for it any way so its not costing you any thing extra for the fact business use is there too

That is nothing to do with it - you are entitled to claim an appropriate proportion of the bill even though it would be the same if there was no business use. Read the guidance you have linked to.

 

[Marco66]

So interms of claiming for use of the garage - any idea on the pecentage to claim based on the amount of rooms ?

In terms of Broadband. We've actually cancelled all other services - including phone but kept broadband as a necessity for the business so don't see why it should be unreasonable to claim for it surely...It's not like we're claiming for all - just 50% which given the broadband is used all day for business is probably lower than it should be..

 

[MrAnchovy]

1/6 (17%) may be a reasonable percentage, only you can decide (and HMRC are entitled to take a different view). I usually recommend declaring the amount and basis of any home use expenses in the "other information" section of the tax return which gives HMRC a shorter amount of time to dispute it.

Bear in mind that as the use of your garage is no longer incidental to the use of your home as a residence the garage will be excluded from Private Residence Relief which may lead to Capital Gains Tax on the sale of your home. You may also need planning permission for a change of use which would lead to business rates being due.

 

[Marco66]

Thanks MrAnchovy - much appreciated !

Fully appreciate the implications as to the use of the garage etc.

 

[MrAnchovy]

Don't forget to claim an appropriate proportion of home insurance (unless you have separately insured the garage for business use), council tax, mortgage interest etc.

Also as you have taken the "business use" plunge, you can probably claim writing down allowances for the M&E elements of the conversion:
http://www.hmrc.gov.uk/manuals/camanual/CA22310.htm

 

[Marco66]

Many thanks for the additional advice - hadn't thought of that.

Just one other question. In reference to claiming the relief for heating etc - should I be re-imbursing myself the appropriate percentage direct to my personal account (via DLA) ?

 

[simon field]

I have seen some bizarre advices on use of home which are clearly against the guideline by HMRC and as a result some ridiculous figures in P&l.
I just tried to give you an example to workout logical amount for work from home. If you have broadband at home, it does not matter you use it for business or not you will have to pay for it any way so its not costing you any thing extra for the fact business use is there too

You could say the same about a car, a phone, well anything really :|

 

[Walkol]

You could say the same about a car, a phone, well anything really :|

Not really, as the cost of the broadband (within reason) wont change with additional use for business. However, the cost of the car will, hence why you claim mileage for business miles, and the cost of phone calls will (unless used within the free minutes etc if on contract).

Will it may be over cautious, I agree with Faraday, and if someone doesn't want to go down the £4 per week allowance route, I would generally say its logical to charge for ADDITIONAL costs that you incur privately because of business use.

 

[Philip Hoyle]

No one seems to have asked the critical question. Are you a self employed sole trader or are you operating via your own limited company.

If the former, than you can claim a proportion of your personal/household costs, so 50% broadband is fine.

If the latter, then you can only claim the extra costs you incur, i.e. no claim for broadband at all as it costs you nothing extra.

The crux is whether your a limited company or not.

If you are, then, probably best to go down the route of giving your company a licence to occupy your land/building, then it pays you a rent, and on your SA return, you can claim a proportion of household costs against the rent - i.e. the way to get you back into the same position as a sole trader.

 

[MrAnchovy]

Will it may be over cautious, I agree with Faraday, and if someone doesn't want to go down the £4 per week allowance route, I would generally say its logical to charge for ADDITIONAL costs that you incur privately because of business use.

It's not "over cautious", it's just plain wrong. What is and what is not an allowable expense is nothing to do with logic, it is determined by tax law.

 

[MrAnchovy]

Many thanks for the additional advice - hadn't thought of that.

Just one other question. In reference to claiming the relief for heating etc - should I be re-imbursing myself the appropriate percentage direct to my personal account (via DLA) ?

Whoah, Directors Loan Account? Is this a limited company? The company cannot claim any of your costs as it's own. You need to arrange to rent the garage to the company, see your accountant. And you can't claim the M&E in this case.

 

[Walkol]

It's not "over cautious", it's just plain wrong. What is and what is not an allowable expense is nothing to do with logic, it is determined by tax law.

So your are saying, by law, you cannot recharge the company for valid business expenses that you incur personally?

 

[MrAnchovy]

So your are saying, by law, you cannot recharge the company for valid business expenses that you incur personally?

No, I am saying that tax liabilites are determined by law not by logic.

 

[Marco66]

No one seems to have asked the critical question. Are you a self employed sole trader or are you operating via your own limited company.

If the former, than you can claim a proportion of your personal/household costs, so 50% broadband is fine.

If the latter, then you can only claim the extra costs you incur, i.e. no claim for broadband at all as it costs you nothing extra.

The crux is whether your a limited company or not.

If you are, then, probably best to go down the route of giving your company a licence to occupy your land/building, then it pays you a rent, and on your SA return, you can claim a proportion of household costs against the rent - i.e. the way to get you back into the same position as a sole trader.

Sorry - forgot to mention in original thread - I'm self employed as sole trader.

 

[MrAnchovy]

Phew, that is how it seemed to me.

You don't have a Directors Loan Account because you are not a director and you cannot make a loan to yourself, you have Drawings.

Yes you can debit your expenses with the appropriate amount and credit drawings.

 

[ruby1990]

You are from which country? Every country has their own tax laws.