wholly or exclusively???
Discussion
My company offices occupy 2 rooms on the grond floor of a small house for which it pays no rent. We personally use the bedroom upstairs in the cottage and live in a barn behind the cottage.
The cottage needs major building repair work: repointing, stonework replaced and outside walls waterproofing, as well as some gutter work.
I was thinking that since 50% of the cottage walls (the downstairs) are used by the company they should pay 50% of the costs of repair, and should reclaim 50% of the VAT paid to the builder. Fair enough?
If that is the case, should I get one receipt showing all the costs and then apportion it based on the floor/wall area or ask for 2 receipts and just put the business one into the accounts?
Does doing this have other implications for the business or me as an individual (CGT/BiK?).
Eric Mc said:
I'm not being funny, but have you put this before your accountant yet?
No, it only occured to me today as I was going over the work with a builder: he mentioned VAT and that got me thinking that I was in fact repairing rooms which I didn't occupy while the company lived rent free. The offices only get personal use for about an hour a month when I use the meeting room.
I am seeing him in a week or so, but like to whittle the wilder ideas down.
Eric Mc said:
Who does own the cottage?
I do.
The company occupies the entire ground floor (both rooms). The company have furnished, decorated and carpeted it but to date I haven't charged the company any maintainence except their periodic share of the window cleaning and the cost of repairing some cracked window panes. Usually it is just repainting external window frames which has been done as part of our general maintainence and which I haven't recharged. There is a slight damp problem in the one office that I hope the repointing will cure.
The Revenue allow a "Use of Home as Office" charge in most buisiness accounts - if it is appropriate.
It is generally made up of the domestic running costs for the entire house suitably apportioned and charged to the business P & L account. The apportionment is usually based on "one room out of "x" habitable rooms.
The costs that are allowed are:
Council Tax
Water Charges
Light and Heat Costs
Repairs and maintenance
The last category has only recently been "allowed" into the equation.
With a limited company, the situation is slightly more complicated than with a sole-trader although I have never had any problems making the claim - as long as it is not too excessive.
If it gets too large, the Revenue would be inclined to look on the charge as "Rent" payable to a landlord - who, in this case would be you - and you would then have to return this "Rent" on your personal Self Assessment tax return.
It is generally made up of the domestic running costs for the entire house suitably apportioned and charged to the business P & L account. The apportionment is usually based on "one room out of "x" habitable rooms.
The costs that are allowed are:
Council Tax
Water Charges
Light and Heat Costs
Repairs and maintenance
The last category has only recently been "allowed" into the equation.
With a limited company, the situation is slightly more complicated than with a sole-trader although I have never had any problems making the claim - as long as it is not too excessive.
If it gets too large, the Revenue would be inclined to look on the charge as "Rent" payable to a landlord - who, in this case would be you - and you would then have to return this "Rent" on your personal Self Assessment tax return.
Edited by Eric Mc on Monday 30th April 08:28
Eric Mc said:
The Revenue allow a "Use of Home as Office" charge in most buisiness accounts - if it is appropriate.
It is generally made up of the domestic running costs for the entire house suitably apportioned and charged to the business P & L account. The apportionment is usually based on "one room out of "x" habitable rooms.
The costs that are allowed are:
Council Tax
Water Charges
Light and Heat Costs
Repairs and maintenance
The last category has only recently been "allowed" into the equation.
With a limited company, the situation is slightly more complicated than with a sole-trader although I have never had any problems making the claim - as long as it is not too excessive.
If it gets too large, the Revenue would be inclined to look on the charge as "Rent" payable to a landlord - who, in this case would be you - and you would then have to return this "Rent" on your personal Self Assessment tax return.
It is generally made up of the domestic running costs for the entire house suitably apportioned and charged to the business P & L account. The apportionment is usually based on "one room out of "x" habitable rooms.
The costs that are allowed are:
Council Tax
Water Charges
Light and Heat Costs
Repairs and maintenance
The last category has only recently been "allowed" into the equation.
With a limited company, the situation is slightly more complicated than with a sole-trader although I have never had any problems making the claim - as long as it is not too excessive.
If it gets too large, the Revenue would be inclined to look on the charge as "Rent" payable to a landlord - who, in this case would be you - and you would then have to return this "Rent" on your personal Self Assessment tax return.
Edited by Eric Mc on Monday 30th April 08:28
Thanks Eric. I think it will be about £2000 ( £5000 overall).
Eric Mc said:
That sounds rather high to me and, in my opinion, might require you to return the £2,000 as personal Rental Income in your Self Assessment tax return.
I would certainly discuss this with your accountant before making any final decisions.
I would certainly discuss this with your accountant before making any final decisions.
Will do Eric. I haven't been taking anything for council tax but guess I should. I have worried about CGT issues.
The business does not pay Council Tax, it pays Business Rates and if it has exclusive possession (at midnight) of any room(s) then you may be liable for business rates.
Up until 31st March 2010 the Valuation Officer will be able to backdate a new entry in the Rating List to 1st April 2005 or any date in between.
Whether the VO will find you is a slightly different question and usually will only find you through a planning application or due to a pissed off neighbour complaining.
Up until 31st March 2010 the Valuation Officer will be able to backdate a new entry in the Rating List to 1st April 2005 or any date in between.
Whether the VO will find you is a slightly different question and usually will only find you through a planning application or due to a pissed off neighbour complaining.
Councils tend not to be too harsh on those running small scale businesses from their domestic dwellings. They get concerned when the activity being carried out has a detrimental effect on the "residential" status of the property or its surroundings.
I've had one small engineering repair company successfully challenge an enquiry fro a local council.
HMRC specifically state that correctly apportioned Council Tax and Water Charges can be offset against business income.
However, local councils do differ in their atitude.
I've had one small engineering repair company successfully challenge an enquiry fro a local council.
HMRC specifically state that correctly apportioned Council Tax and Water Charges can be offset against business income.
However, local councils do differ in their atitude.
chrisgr31 said:
The business does not pay Council Tax, it pays Business Rates and if it has exclusive possession (at midnight) of any room(s) then you may be liable for business rates.
Up until 31st March 2010 the Valuation Officer will be able to backdate a new entry in the Rating List to 1st April 2005 or any date in between.
Whether the VO will find you is a slightly different question and usually will only find you through a planning application or due to a pissed off neighbour complaining.
Up until 31st March 2010 the Valuation Officer will be able to backdate a new entry in the Rating List to 1st April 2005 or any date in between.
Whether the VO will find you is a slightly different question and usually will only find you through a planning application or due to a pissed off neighbour complaining.
That's why I keep a low profile. The only signs that I work from home is that the postman comes every day, we get a courier once or twice a week in/out and I get a local visitor every one or two days. We even decline to have our sponsorship of the loacl charity group publicised. I recall Shrewsbury and Atcham council were trying it on with small buisinesses run from domestic premises looking for business rates but frankly they can't have it everyway: no commuting co2, no congeston, local jobs ( I 'employ'(not in the HMRC sense you understand) 14 part timers who all work from home). I have avoided off-setting council tax because of this but guess HMRC and my local council are not joined up enough to share the information.
It shouldn't really be a problem (for the reasons mentioned above).
Councils are really only authorised to seek business rates when someone is operating from a bona fide business premises.
Running a small business from your home does not automatically turn it into a business premises.
Councils are really only authorised to seek business rates when someone is operating from a bona fide business premises.
Running a small business from your home does not automatically turn it into a business premises.
chrisgr31 said:
pissed off neighbour complaining.
Leftie sorry to hijack the thread, We have just brought a house 3 months ago and there is a covernant in the deeds to prevent anyone using the home as a business premises.
Well the wife is now renting a small studio tye office away from the home. to get around that but she sometimes works from home. Which i do not see a problem in. BUT the neighbour is operatinga fully fledge business from home, and has 2-3 visitors per day and at least 2 deliverys a day.
I am already in a dispute with them See here:
www.pistonheads.com/gassing/topic.asp?h=0&f=92&t=378264
Now i am a reasonable bloke and all i have asken them is not to park on my drive blocking me in.
what would the penalty be if a "pissed off neighbour complained" about operating a busines from home. (Leftie may cover you if you upset one of your neighbours)
Eric Mc said:
It shouldn't really be a problem (for the reasons mentioned above).
Councils are really only authorised to seek business rates when someone is operating from a bona fide business premises.
Running a small business from your home does not automatically turn it into a business premises.
Councils are really only authorised to seek business rates when someone is operating from a bona fide business premises.
Running a small business from your home does not automatically turn it into a business premises.
It is slightly more complex.
The Valuation Officer (an executive agency of the Inland Revenue) is responsible for compiling and maintaining the Rating List. They are assisted in this by Councils providing details of new/converted business premises etc. However the VO also receive tip-offs direct from neighbours, other businesses (its not fair Bloggs doesn;t pay rates etc).
Generally Councils and VOs will seek to avoid assessing one man bands operating out of their spare room, and in any event it is arguable that the spare room is domestic. However if it is clear that the business has exclusive use of part of the premises (say the Garage has been converted to an office) then the VO is likely to assess it, if they become aware of it.
The good news is that there is small business relief, so an RV of less than £5,000 gets 50% of the rates bill, as long as the business has no other commercial premises.
So whilst I agree that the powers that be are not proactive in seeking to assess people working from home, if someone makes a formal complaint about it happening then they may have to take action. It is only a problem if you use an area exclusively for business.
Some examples
I was asked to go to a house where it was alledged someone was operating a laundering service for restaurants table clothes etc. Got to the property an in the garage they had 2 washing machines and tumble driers. They also though had a fridge, a freezer, assorted kids bicycles and the other clutter we keep in garages. On a washing line outside where lots of table clothes. Decided that they were using the property for business use, but no exclusive occupation therefore not assessable.
I was asked to go to a large (3 storey) detached house, with a garage converted to offices for the owners architectual business. Business has exclusive use of garge therefore assessed.
Lands Tribunal case involving Inland Revenue employee working from home, and had some works to convert part of the house to make it easier to work. However held those areas still also residential therefore no business rates.
And finally the lengths people go to: -
We had received a report that a shop was no longer trading and had been converted to residential. A colleague went along on a pre-booked appointment. Sure enough no signs of a shop, bookcase, three piece suite, TV etc in the "shop". However my colleague noticed that the "Open/C;osed" sign was still on the door. Sure enough went back a week later unannounced and the till, counter, display materials etc were all back in the shop and they were trading!
That is more or less how I understood it. Using a bedroom as an office or writing up your books using the kitchen table as a desk will not result in you being assessed for Business Rates.
Having said that, last year a local council did have a go at someone who ironically was:
a) an employee
and
b) worked for HM Revenue and Customs.
Needless to say, the council lost that particular attack.
Having said that, last year a local council did have a go at someone who ironically was:
a) an employee
and
b) worked for HM Revenue and Customs.
Needless to say, the council lost that particular attack.
stevieb said:
chrisgr31 said:
pissed off neighbour complaining.
what would the penalty be if a "pissed off neighbour complained" about operating a busines from home. (Leftie may cover you if you upset one of your neighbours)
Hopefully that won't happen as out of 7 neighbours one works for me from his own house, the daughter of another used to, 2 more run businesses from home (one much larger than me) and 2 are retired (but one used to run a business from home). That leaves the nice folks across the road, who are not backward in telling people if they are doing stuff that annoys, which suits me fine. We are also the largest sponsors of the village social scene, so anybody wishing to make trouble could find themselves without any summer BBQ invites!
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