Sole Trader expenses question: use of home as office

Sole Trader expenses question: use of home as office

Author
Discussion

dazco

4,280 posts

188 months

Thursday 26th January 2012
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Eric Mc said:
All fine - but it is impossible for HMRC to prove that a room was used "exclusively" for business UNLESS the room was copnverted in such a way that it was not CAPABLE of being used EXCEPT for business purposes.

HMRC will NEVER expect a CGT charge on the use of a "NON-CONVERTED" bedroom, garage, living room etc.
This question was raised on the Money Box Live - Self Assessment special on Radio 4 yesterday and the following experts all said more or less what I'm saying - Jane Moore, Technical Manager at the Institute of Chartered Accountants in England and Wales, Leonie Kerswill, Tax Partner, PricewaterhouseCoopers and Chas Roy-Chowdhury, ACCA, Head of Taxation.

I've been preparing CGT returns in the UK for a quarter of a century and this has NEVER been challenged by HMRC in any return I've submitted for a householder who ran a business from home.
just sayin'

sideways sid

1,371 posts

214 months

Thursday 26th January 2012
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Thanks to Eric and others for this advice.

However, doesn't it just move the cost of premises from the company to the individual? i.e. the LtdCo reduces profits and pays less Corporation Tax, but the Director receives a rental payment which is taxable as Income? Or is the payment classed as an expense and therefore not taxable?

sideways sid

1,371 posts

214 months

Thursday 26th January 2012
quotequote all
Eric Mc said:
It's a reimbursment.

It does need to be declared (on the Form P11D and on the director's self assessment tax return) but no tax will be chargeable on the director provided the cost is a pure reimbursment i.e. there is no "profit" or "gain" received by the individual.

The 45p/25p per mile Mileage Claim is outside of the P11D declaration system.
Oops just re-read your earlier post which answered my question. Thanks. A few of us here owe you a beer!

Esseesse

8,969 posts

207 months

Thursday 30th October 2014
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This is a great thread, with some great replies. Thanks all (currently doing the number crunching for this year).

Esseesse

8,969 posts

207 months

Thursday 30th October 2014
quotequote all
Eric Mc said:
Calculate how many liveable rooms there are in the house (include living rooms, dining rooms, kitchens and bedrooms. Ignore hallways, loos, bathrooms, garages utility rooms, outhouses and sheds).
For most people that usually workd out at 4 to 6.
If (say) 6, divide the domestic costs by 1/6. You can claim this figure as your "Use of Home as Office".
I have 5 rooms by this calculation (3 bedrooms, 1 lounge, 1 kitchen/diner). I take up one bedroom for work stuff (and it literally is taken up, I'm a developer and have servers and UPS's running 24x7). I've got to go back and do the adding again this evening but 1/5th of all the bills is the thick end of £2k. Does this fit in peoples 'sane' range (in all honestly the study/bedroom takes a disproportionately large amount of electricity and broadband)?

Alpinestars

13,954 posts

243 months

Friday 31st October 2014
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Eric Mc said:
This question was raised on the Money Box Live - Self Assessment special on Radio 4 yesterday and the following experts all said more or less what I'm saying - .... Leonie Kerswill, Tax Partner, PricewaterhouseCoopers
Fellow tax partner of mine. She'll be delighted you're quoting her on PH!

Eric Mc

121,779 posts

264 months

Sunday 2nd November 2014
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She knows her stuff smile

bogie

16,342 posts

271 months

Monday 3rd November 2014
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Esseesse said:
Eric Mc said:
Calculate how many liveable rooms there are in the house (include living rooms, dining rooms, kitchens and bedrooms. Ignore hallways, loos, bathrooms, garages utility rooms, outhouses and sheds).
For most people that usually workd out at 4 to 6.
If (say) 6, divide the domestic costs by 1/6. You can claim this figure as your "Use of Home as Office".
I have 5 rooms by this calculation (3 bedrooms, 1 lounge, 1 kitchen/diner). I take up one bedroom for work stuff (and it literally is taken up, I'm a developer and have servers and UPS's running 24x7). I've got to go back and do the adding again this evening but 1/5th of all the bills is the thick end of £2k. Does this fit in peoples 'sane' range (in all honestly the study/bedroom takes a disproportionately large amount of electricity and broadband)?
Your household bills are like £10k a year?

I have an office at home (5 bed house, 1 living room) and work it out as above and my bills around £6500 a year giving me £1300 to put on my tax return...so I get tax relief on the £1300 at 40%

Esseesse

8,969 posts

207 months

Monday 3rd November 2014
quotequote all
bogie said:
Esseesse said:
Eric Mc said:
Calculate how many liveable rooms there are in the house (include living rooms, dining rooms, kitchens and bedrooms. Ignore hallways, loos, bathrooms, garages utility rooms, outhouses and sheds).
For most people that usually workd out at 4 to 6.
If (say) 6, divide the domestic costs by 1/6. You can claim this figure as your "Use of Home as Office".
I have 5 rooms by this calculation (3 bedrooms, 1 lounge, 1 kitchen/diner). I take up one bedroom for work stuff (and it literally is taken up, I'm a developer and have servers and UPS's running 24x7). I've got to go back and do the adding again this evening but 1/5th of all the bills is the thick end of £2k. Does this fit in peoples 'sane' range (in all honestly the study/bedroom takes a disproportionately large amount of electricity and broadband)?
Your household bills are like £10k a year?

I have an office at home (5 bed house, 1 living room) and work it out as above and my bills around £6500 a year giving me £1300 to put on my tax return...so I get tax relief on the £1300 at 40%
I've done the maths and it comes to just under £1500. The bills came to about £7500. Remember you can claim a % of the interest part of your mortgage, so mine could be very different to yours.

bogie

16,342 posts

271 months

Monday 3rd November 2014
quotequote all
yeah...forgot to add the interest of the mortgage onto my bill total, so probably should be getting tax relief on £1500 ish this year