Working from home expenses/tax
Discussion
I am trying to claim back working from home expenses from the Inland Revenue for my last job. Twice, I was told by the IR that I could claim a proportion of gas, electricity etc and most importantly a proportion of mortgage interest. I submitted a claim a couple of months ago and I've been sitting waiting for nearly two year's expenses to be refunded.
This morning they have phoned and told me "good news" the claim has been approved, but "bad news" I will not be able to claim the mortgage interest side of things (obviously by far the biggest part of the claim!). I'd been "misinformed" all along by various people at the IR.
Does anyone have any experience of this? In some ways it did seem to good to be true, but on previous calls to them, the IR explained that because I was losing a room of my house permanently to work use as my office, I could claim this proportion back.
If anyone has any experience of this I would be very grateful to hear it!
This morning they have phoned and told me "good news" the claim has been approved, but "bad news" I will not be able to claim the mortgage interest side of things (obviously by far the biggest part of the claim!). I'd been "misinformed" all along by various people at the IR.
Does anyone have any experience of this? In some ways it did seem to good to be true, but on previous calls to them, the IR explained that because I was losing a room of my house permanently to work use as my office, I could claim this proportion back.
If anyone has any experience of this I would be very grateful to hear it!
You can claim £15 per week for use of a room as home office, but that room must be used as a household room as well. E.G. you need a sofabed in there, so that it is a guest room that you use as an office. If it's only got office equipment in there, thne you may not be ableto claim it.
I'm sure Eric Mc will be along shortly to correct/embellish.
I'm sure Eric Mc will be along shortly to correct/embellish.
My business partners and I maintain home offices and we do cliam a proporting of the household costs to cover it. I'm pretty sure interest payments were on there but I cannot for the life of me remember. It is one of those things that the accountant just does for us.
Have a chat with an acocuntant...Eric...
D
Have a chat with an acocuntant...Eric...
D
GreenV8S said:My accountant told me that too, but I was waiting for Eric Mc to 'confirm' it.
Isn't there some nasty side effect of this, where some part of the capital gain on the property then acquires a different tax status? Vaguely remember reading something of the sort here ...
IIRC, if you claim 20% of your mortgage payment as a business expense, then you have to pay CGT (or some other tax?) on 20% of any profits from the sale of the house.
Mind you, this is based on my recollection of a conversation with my accountant a good few years ago, so may not be 100%
GreenV8S said:
Isn't there some nasty side effect of this, where some part of the capital gain on the property then acquires a different tax status? Vaguely remember reading something of the sort here ...
I vaguely remember that if you claim expenses on square footage they then wallop you for business rates on the same proportion of the floor space.
Thanks for all your help so far guys, sounds like Eric Mc is the guru I need to hear from!
Re square footage, I was told by the IR that it works on usable rooms, so for example excluding hallway and bathroom, you could claim 1/4 of expenses back if you have a living room, kitchen and 2 bedrooms as it's one out the four rooms.
Re the other stuff, not sure if it's different rules for self-employed and employed.
Re square footage, I was told by the IR that it works on usable rooms, so for example excluding hallway and bathroom, you could claim 1/4 of expenses back if you have a living room, kitchen and 2 bedrooms as it's one out the four rooms.
Re the other stuff, not sure if it's different rules for self-employed and employed.
Plotloss said:
Isn't there some nasty side effect of this, where some part of the capital gain on the property then acquires a different tax status? Vaguely remember reading something of the sort here ...
I vaguely remember that if you claim expenses on square footage they then wallop you for business rates on the same proportion of the floor space.
The Business Rate issue will apply if you use a room soley for business so the guy whose study has been fitted out to assit in working from home could have a problem if the Valuation Office finds out!
No science behind it, but my accountant puts in a flat £500pa as a contribution to household expenses (so less than the suggested £15pw). His belief is that any more would raise eyebrows at the IR.
Such a figure falls below the level where you risk business rate classification, planning permission, or any CGT-type issues. Of course anything that can be directly applied to the business (ISP account, laying Ethernet cabling, furniture) is claimed separately.
Such a figure falls below the level where you risk business rate classification, planning permission, or any CGT-type issues. Of course anything that can be directly applied to the business (ISP account, laying Ethernet cabling, furniture) is claimed separately.
Been away.
Forget Mortgage Interest as part of the claim. I tried it once witha client and was shot down by the Revenue.
The "Use of Home as Office" claim is usually based on utility bills i.e - gas, electricity, council tax and water charges. Add them together for the tax year and then divide the total by the number of habitable rooms in the premises (excluding hallways, toilet/bathrooms and utility rooms).
As long as no significant alterations have been made to the house there should be council tax or Capital Gains Tax issues at all.
Forget Mortgage Interest as part of the claim. I tried it once witha client and was shot down by the Revenue.
The "Use of Home as Office" claim is usually based on utility bills i.e - gas, electricity, council tax and water charges. Add them together for the tax year and then divide the total by the number of habitable rooms in the premises (excluding hallways, toilet/bathrooms and utility rooms).
As long as no significant alterations have been made to the house there should be council tax or Capital Gains Tax issues at all.
Here is a quote from the 2005/06 Tolley's Tax Guide (my bible) -
Where busines rates are not paid, you are able to treat as a business expense an appropriate proportion of the council tax acording to the business use of the home.
I would take that as a pretty clear indication that you CAN claim a business proprtion of the domestic council tax bill. In the case I mentioned above where the Revenue refused my claim for the proprtion of the mortgage interest, they certainly had no problem with my claim for the proportion of council tax. In fact, I have never had a problem with the "council tax" claim.
Where busines rates are not paid, you are able to treat as a business expense an appropriate proportion of the council tax acording to the business use of the home.
I would take that as a pretty clear indication that you CAN claim a business proprtion of the domestic council tax bill. In the case I mentioned above where the Revenue refused my claim for the proprtion of the mortgage interest, they certainly had no problem with my claim for the proportion of council tax. In fact, I have never had a problem with the "council tax" claim.
Eric Mc said:
Here is a quote from the 2005/06 Tolley's Tax Guide (my bible) -
Where busines rates are not paid, you are able to treat as a business expense an appropriate proportion of the council tax acording to the business use of the home.
I would take that as a pretty clear indication that you CAN claim a business proprtion of the domestic council tax bill. In the case I mentioned above where the Revenue refused my claim for the proprtion of the mortgage interest, they certainly had no problem with my claim for the proportion of council tax. In fact, I have never had a problem with the "council tax" claim.
My concern would be bring my home business to the attention of the council, should the council want info I am sure HMRC would give it. I recall that one council ( was it Shrewsbury and Atcham) were starting to try and levy business rates on businesses run from domestic addresses. I try to keep a low profile in that respect, even to the point of declining publicity for sponsoring local charities if it identifies our location.
I kept a log of the hours and times I use various parts of the house for business purposes over a 3 month period, then apportioned the cost against gas and electricity bills and now claim a set amount each month.
I hadn't thought about apportioning the very large council tax bill, or is that just for 'working from home' where you do have a base elsewhere, rather than a compete business run from part of the home?
As long as you do not obviously "convert" any aspect of your domestic premises into a "business premises" (this does not include using a bedroom as a study) or your business activities do not generate obvious business type activities on the premises (multiple deliveries during the day, streams of clients/customers coming and going, large amounts of businness related waste etc etc etc) then you should have no problem at all from your local council.
I have a client who has run an engineeering maintenance business from his home for almost 20 years. The local council did check him out (eventually) and they gave him the all clear to continue as normal. He has regular (but not TOO many) business deliveries during the day and he converted the roof space above his garage into an engineering workshop. The council were happy that he had not seriously affected the overall "domestic" ambience of the property and therfore did not levy any business rates.
It will also not affect the Capital Gains Exemption on his domestic residence.
I have a client who has run an engineeering maintenance business from his home for almost 20 years. The local council did check him out (eventually) and they gave him the all clear to continue as normal. He has regular (but not TOO many) business deliveries during the day and he converted the roof space above his garage into an engineering workshop. The council were happy that he had not seriously affected the overall "domestic" ambience of the property and therfore did not levy any business rates.
It will also not affect the Capital Gains Exemption on his domestic residence.
Eric Mc said:
I have a client who has run an engineeering maintenance business from his home for almost 20 years. The local council did check him out (eventually) and they gave him the all clear to continue as normal. He has regular (but not TOO many) business deliveries during the day and he converted the roof space above his garage into an engineering workshop. The council were happy that he had not seriously affected the overall "domestic" ambience of the property and therfore did not levy any business rates.
Sounds to me as though he is sailing close to the wind on Non-Domestic rate liability. It is not the local Council who decide whether a property is subject to non-domestic rates but the Valuation Officer (the Valuation Office being an executive agency of the inland revenue). The VO receives reports from the Local Council for property to go and value, but more crucially also can receive reports from any person be they an aggrieved client, neighbour or general busybody. The local council inspector may have decided to let sleeping dogs lie, the VO if he gets a report from elsewhere might not.
What frequently happens is that the VO is dealing with a case of a competitor who is appealling against his business rates and says "Joe Bloggs up at acaia avenue doesn't pay rates" and the VO is then dutybound to investigate.
Having said that the VO is usually reluctant to assess people working from home, particularly if there is any doubt about the split between domestic and non-domestic. I know when I worked at the VO we got a report about someone washing tablecloths for local restaurants. Although there were a lot of tablecloths etc lurking in the house, and an additioanl washing machine and tumble dryer in th garage, the garage was still full of domestic crap (bicycles etc) therefore we decided not to assess them for non-domestic rates.
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