Working from home tax relief advice question

[Gio G]

Hi all,

I work for large Amercian business and back in 2010, was forced to work from home, as a local office shut down. Having been on the respective HMRC websites I think I will be entitled to the monthly rate of tax reflief, something like £18 a month, which will not require me to produce any evidence of bills. What I would like to do is calculate this rate versus how much (apportioned) gas, electricity and so on I am using. I am currently working from my dining area and wanted to understand how people try to claim over and above the set rate? What methodogy do people use?

Thanks G.

[Eric Mc]

Household utility bills (gas, electricity, Council Tax, Water Charges, household insurance etc) all added together and the total divided by the number of habitable rooms in the house.

Habitable rooms include living/dining rooms, bedrooms and kitchen but exclude hallways, utility rooms, bathrooms and outhouses.

[Gio G]

Eric Mc said:

Household utility bills (gas, electricity, Council Tax, Water Charges, household insurance etc) all added together and the total divided by the number of habitable rooms in the house.

Habitable rooms include living/dining rooms, bedrooms and kitchen but exclude hallways, utility rooms, bathrooms and outhouses.

Many thanks Eric. Would I need to provide evidence of every bill going back to 2010? As I would probably calculate it from bank statements..

Thanks
G

[Jockman]

More evidence is better than less.

Any thoughts on notifying your Insurer that you are using your house for business purposes ?? May negate the policy or increase it substantially.

Any thoughts on notifying your local Council for a Rates reassessment ?? - I think they use the same formula as HMRC when calculating the higher rates.

[Eric Mc]

Gio G said:

Eric Mc said:

Household utility bills (gas, electricity, Council Tax, Water Charges, household insurance etc) all added together and the total divided by the number of habitable rooms in the house.

Habitable rooms include living/dining rooms, bedrooms and kitchen but exclude hallways, utility rooms, bathrooms and outhouses.

Many thanks Eric. Would I need to provide evidence of every bill going back to 2010? As I would probably calculate it from bank statements..

Thanks
G

Evidence is always good to have.

Original invoices are best.

However, bank and credit card statements can provide sufficient evidence in many cases.

[Ian350]

I'm no tax expert but I seem to recall a catch - when you sell your home any increase in value is usually tax free. However if you designate, say 1/10th of it as business, then when/if you sell 1/10th of the increase over the business period" could be taxed.

[ellroy]

Jockman said:

Any thoughts on notifying your Insurer that you are using your house for business purposes ?? May negate the policy or increase it substantially.

Any thoughts on notifying your local Council for a Rates reassessment ?? - I think they use the same formula as HMRC when calculating the higher rates.

Utter nonsense. He's working from home, NOT running a business from home and there in lies the difference.

[Eric Mc]

ellroy said:

Jockman said:

Any thoughts on notifying your Insurer that you are using your house for business purposes ?? May negate the policy or increase it substantially.

Any thoughts on notifying your local Council for a Rates reassessment ?? - I think they use the same formula as HMRC when calculating the higher rates.

Utter nonsense. He's working from home, NOT running a business from home and there in lies the difference.

I wouldn't say it was UTTER nonsense. There are SOME tax risks in using your home outside of its normal domestic purpose. However, the risks on the whole, are very, very low.

Havig said that, there was a case a few years ago where an employee (NOT someone running a business) who was working from home was slapped with a Business Rates demand by her local council. She appealed against the charge and luckilly for everyone, she won. But it just shows that you can never be 100% sure about anything when it comes to any aspects of UK taxation.

The general Capital Gains Tax rule is that, as long as you do not physicaly convert part of the house to a non-residential purpose, (it doen't necessarilly have to be anything to do with a business) then the Capital Gains Tax Main Residence Exemption will still be available when the house is sold.

If you actually converted (say) a garage into a workshop where you made things for onward sale, or you converted a living room into a doctor's surgery, then that part of the house would not be covered by the Main Residence Exemption for CGT.

[Jockman]

ellroy said:

Utter nonsense. He's working from home, NOT running a business from home and there in lies the difference.

Rubbish. This is not a black and white picture (is it ever?).

People who have no physical place of work outside of their Primary Residence and so turn their Dining Room (for example) into a de facto workplace CAN leave themselves open to interpretation by the relevant authorities. Indeed, I would venture that an Insurer would use this scenario, in the unlikely of a claim, as a means of qualifying a judgement in light of OP's Declaration that no part of his property is used for business purposes.

This is not somebody taking work home.

As an aside, my wife runs her business from our domestic premises and I'm well aware of the % I can claim back on her Annual Accounts.

PRE on CGT, though probably not pertinent in this case, is interesting. Eric (as ever) is correct on the modifications part. I would note in addition that one of our rooms has been adapted into a mobile beauty area, containing a sofa in the waiting area. Because it is a sofa bed and the room was formerly a bedroom, this room is NOT liable to assessment for business purposes as it retains a domestic element. Funny, eh?

Edited by Jockman on Wednesday 23 January 20:32

[Eric Mc]

Funny that. I've got a drop down sofa bed in my office - for the use of clients but convertible back to a bed if necessary.

[New POD]

Jockman said:

More evidence is better than less.

Any thoughts on notifying your Insurer that you are using your house for business purposes ?? May negate the policy or increase it substantially.

Any thoughts on notifying your local Council for a Rates reassessment ?? - I think they use the same formula as HMRC when calculating the higher rates.

I and my wife work from home, and at clients site's and I just don't bother to claim any tax relief for the space we are using, as well I just can't be bothered, not that a few quid wouldn't in handy come.

However I did check with house insurance (Aviva) and they said, as long as no clients visit the house that is fine.

A home office isn't the same as changing the use of a property. Premoninately it's a house, so no change of use and no business rates apply.

[Jockman]

New POD said:

However I did check with house insurance (Aviva) and they said, as long as no clients visit the house that is fine.

A home office isn't the same as changing the use of a property. Premoninately it's a house, so no change of use and no business rates apply.

Great!

So long as you have asked the question and been given assurances then there are no grey areas for you to be concerned about.

[Irrotational]

Eric Mc said:

Funny that. I've got a drop down sofa bed in my office - for the use of clients...

I read as far as that and went

[Eric Mc]

Irrotational said:

Eric Mc said:

Funny that. I've got a drop down sofa bed in my office - for the use of clients...

I read as far as that and went

Oddly enough - they nearly all refuse any invitation to use it.

[Irrotational]

[Broomsticklady]

WAsn't aware of this possibilty - my OH is my carer now - I'm not able to look after myself (secondary breast cancer) and works from home, amanaging teams in London and Chennai. His 'official' home base is Edinburgh, so it makesd no diference to his employer - he's still a remote manager cos we're outside Aberdeen 175 miles away.

I rang the tax office but was told no relief if 'by choice'. IS this right - any loopholes I can use? Every penny counts now I'm forcibly retired!!

Nina

[Eric Mc]

I'm afraid that, if an employee, CHOOSES to work from home, then no relief can be claimed.

If an employee is MADE work at home by his employer, then the employee CAN claim relief.

It's to do with the way the allow ability of expenses in employment are given. They need to have been incurred, "wholly, exclusively and NECESSARILLY as part of the job".

[Deva Link]

Eric Mc said:

I'm afraid that, if an employee, CHOOSES to work from home, then no relief can be claimed.

You could make a case that it's a benefit - saving commuting cost, time etc.

[Deva Link]

Jockman said:

People who have no physical place of work outside of their Primary Residence and so turn their Dining Room (for example) into a de facto workplace CAN leave themselves open to interpretation by the relevant authorities. Indeed, I would venture that an Insurer would use this scenario, in the unlikely of a claim, as a means of qualifying a judgement in light of OP's Declaration that no part of his property is used for business purposes.

Our insurer had a bit of a wobbly this year when I renewed the policy. It does say (as standard) that clerical work is OK at home but the person I was speaking to (mainly to change my wife's occupation) seemed to very concerned about running a business from home when I said the house was normally occupied during the day. She went off to check with someone and it was only that our registered office is elsewhere, and we don't have business callers or stock, that seemed to settle her.

[Eric Mc]

Deva Link said:

Eric Mc said:

I'm afraid that, if an employee, CHOOSES to work from home, then no relief can be claimed.

You could make a case that it's a benefit - saving commuting cost, time etc.

You could - but you would lose. There is no provsion in tax law for allowing employees to make an expense claim against their tax bills because it has some benefit to society - sadly.