Home office PAYG

[gopher]

Can anyone tell me if expenses accrued by using your home as your office can be offset against your tax liability or if these expenses should just be claimed like any other expense direct from your employer?

I am hoping on a new position soon that will see me working from home permanantly and as a result my heating,lighting electricty bills etc are going to go up, and probably by a reasonable amount (as otherwise the house is empty 9-10 hours a day). Also I'll be paying my mortgage to pay for my place of employment.

I know provisions exist when you are SE but don't know when employed. The firm I will be working for do not pay expenses for this, and I will better off anyway in terms of not having to run two cars (well we will but the 2nd car no longer needs to be reliable, fuel efficient, cheap to insure etc ), so I'm not trying to be as skin flint but I reckon it's better off in my pocket than in Gordon's (as he's proved he doesn't know what best to do with it).

Cheers

Paul

[Eric Mc]

Broadly speaking, the same types of expenses can be claimed whther you are Employed or Self Employed. However, the "test" as to whether the expense is actually tax deductable or not is more stringent for those who are Employed.

For the Self Employed, the tax regulations state that expenses incurred "wholly and exclusively" for the purpose of the trade are allwable.

For Employees, the regulations say that the expenses can be allowed if they were incurred, "wholly, exclusively AND NECESSARILLY" in the course of the employment duties.

The next question is who do you make your claims to?

If you make a separate claim from your employer for these additional costs which you have incurred by dint of your working from home, as long as there is no element of "profit" in the claims i.e. the employer pays to you an amount which equates accurately to the additional costs incurred, then the tax man will not expect you to suffer any tax on these extra payments from your employer. They are, in effect, reimbursed expenses. However, there may be need for the employer to outline these "Expense" payments on the P11d form and for you to make a separate tax claim from the Revenue under Section 336 (formerly Section 198) to prevent tax being levied on you personally.

If your employer DOES NOT reimburse you for these additional expenses, you can personally claim the related tax relief by submitting a Self Assessment or new style Short Form tax return.

What expenses are we talking about -

The Revenue say that additional light and heat costs, telephone costs, water charges and council tax should make up the bulk of any such claim as these would make up the main element of extra costs incurred by being at home during the day. The usual practice is to add up these costs for the relevant tax year and then divide them by the number of habitable rooms in the house (excluding hallways, bathrooms, garages and utility rooms).

[gopher]

Thank you Eric, that was a surprisingly more positive reply than I was expecting, and very helpful.

Cheers

Paul

[Eric Mc]

The key word is "necesarilly". If you CHOSE to do something because your boss gives you an option, it may fail the "necessarilly" test. However, if the boss says that you MUST work from home "x" days per week, then it becomes a condition of your employment and will pass the test.

[gopher]

Eric Mc said:

The key word is "necesarilly". If you CHOSE to do something because your boss gives you an option, it may fail the "necessarilly" test. However, if the boss says that you MUST work from home "x" days per week, then it becomes a condition of your employment and will pass the test.

I imagine that as the company does not have a UK based office that should be ok (as there are currently just 3 UK employees dotted around the country it's not really an option). They will re-imburse telephone calls so that bit is taken care of, was just wondering about the utilities (and I had not thought of council tax) that I know they do not re-imburse or allow for.

Thanks again

Paul