Getting my study fitted out - Tax deductible?
Getting my study fitted out - Tax deductible?
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srebbe64

Original Poster:

13,021 posts

267 months

Saturday 22nd September 2007
quotequote all
I recently moved house and I'm in the process of doing each room up to how we'd like it. The first room I'm doing up is my study - it's been decorated and in a couple of weeks I'm having furniture (desks, cupboards, etc..) built in.

Now I work from home at least one or two days a week, which is why I'm doing up the study first. As such, is it possible to have some of the cost, say 20%, Tax deductible? It's costing a fair bit of dosh so it's worth asking the question. Probably one for "EricMc Guru".


Imran-vx

11,838 posts

265 months

Saturday 22nd September 2007
quotequote all
srebbe64 said:
I recently moved house and I'm in the process of doing each room up to how we'd like it. The first room I'm doing up is my study - it's been decorated and in a couple of weeks I'm having furniture (desks, cupboards, etc..) built in.

Now I work from home at least one or two days a week, which is why I'm doing up the study first. As such, is it possible to have some of the cost, say 20%, Tax deductible? It's costing a fair bit of dosh so it's worth asking the question. Probably one for "EricMc Guru".

Have posted a few such questions of late (so many folks must be getting fed up of me). The key thing seems to be reasonableness and being able to justify it although the terms 'wholly and exlusively' seem to be the tax mans watch words.

I have claimed all of my office costs ( decoration, carpets, servicing the gas fire) as I work exclusively from home and the room has no other use. There was some debate about more 'capital' type exopenditure like built in furniture (in my case having the outside walls rendered, the walls repointed and exterior redecoration) which folks seemed to suggest was adding capital value to the building and therefore I should swallow that myself.

Eric Mc is the oracle on such matters!


driverrob

4,847 posts

233 months

Saturday 22nd September 2007
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Depending on how honest you are, doing what you plan may contravene local planning regs or covenants on your house. It may also affect your council tax and house insurance. I suggest you do some research before comitting yourself.

Eric Mc

125,770 posts

295 months

Sunday 23rd September 2007
quotequote all
Are you self-employed or an employee?

Regarding Council Tax, this is hardly ever an issue when you are only talking about a simple bedroom fitting out. The vast majority of councils will only be interested in levying Business Rates on a premises when the building has been seriously converted for obvious business purposes - examples usually involve adding on office extension or converting garages into surgeries, offices or workshops. They also take an interest if the nature of activity around the "home" begins to take on a business like nature e.g. multiple deliveries, lots of customers, clients or suppliers arriving and departing, noisy activities or other environmental impacts etc etc.

I have many clients who run their businesses from home and only one was ever queried by their local council. In his case, once the details of his trading activity were given to the council, they agreed that Business Raytes were not appropriate.

Insurance is an issue - but only because any "business" should carry various insurances and it makes sense to ensure that the right insurances are in place.

Edited by Eric Mc on Sunday 23 September 10:11

srebbe64

Original Poster:

13,021 posts

267 months

Sunday 23rd September 2007
quotequote all
Eric Mc said:
Are you self-employed or an employee?
I'm an employee of my own company.
I work from home a day or two a week.
Working from home is necessary for me to do my job effectively. As such, I figure that 20% of the cost is a legitimate business cost and therefore should bwe 20% tax deductible.

Eric Mc

125,770 posts

295 months

Sunday 23rd September 2007
quotequote all
It's a bit more complicated in those circumstances.

For my owner managed home based limited company clients , I find the best technique is to put through a "Use of Home as Office" charge in the limited company accounts,. This cost is based on the Revenue guidelines of adding together the domestic costs (council tax, water charges, light and heat bills, buildings and contents insurance etc) and then applying a fraction based on the habitable rooms in the house, usually a fraction close to 1/5 or 1/6.
The accounting entry is:

Debit "Use of Home as Office"
Credit "Director's Current/Loan Account".

srebbe64

Original Poster:

13,021 posts

267 months

Sunday 23rd September 2007
quotequote all
Eric Mc said:
It's a bit more complicated in those circumstances.

For my owner managed home based limited company clients , I find the best technique is to put through a "Use of Home as Office" charge in the limited company accounts,. This cost is based on the Revenue guidelines of adding together the domestic costs (council tax, water charges, light and heat bills, buildings and contents insurance etc) and then applying a fraction based on the habitable rooms in the house, usually a fraction close to 1/5 or 1/6.
The accounting entry is:

Debit "Use of Home as Office"
Credit "Director's Current/Loan Account".
Cheers Eric. I'll certainly get my accountant to do that.

Secondly, is there any way the actual constructing of the study could be tax deductible. It's costing about £10k, so could I claim that, say, £2k of that is a business expense?

Eric Mc

125,770 posts

295 months

Monday 24th September 2007
quotequote all
The general tax rule is that Capital Expenditure on buildings is not tax deductable -

first of all becuase Capital Costs are Balance Sheet items rather than ordinary expenses

secondly, there are very few Capital Allowances available on buildings or building costs. Only specific types of buildings are eligible for Capital Allowances, chiefly Agricultural or Industrial Buildings. Offices normally don't count.

To make a tax claim, the only way for construction costs to be allowed is to have them categorised as repairs. Normally, it is possible to claim that some of the costs are repair costs but probably not all.

Capital Allowance rules are changing in April so you might want to discuss with your accountant what the new regulations are likely to be - the Revenue have not released full details yet.

LeeME3

1,502 posts

256 months

Wednesday 26th September 2007
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Slightly off topic Q for Eric..... are you a self-employed 'freelance' accountant by any chance?

Eric Mc

125,770 posts

295 months

Wednesday 26th September 2007
quotequote all
Yes.

LeeME3

1,502 posts

256 months

Wednesday 26th September 2007
quotequote all
Eric Mc said:
Yes.
TVM, Eric YHM.

davidd

6,718 posts

314 months

Thursday 27th September 2007
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However if the business owns the kit, computers, printers, phones, desk, chairs, coffee machine etc the it can just go through the books. I would have thought that as long as you can feasably get it out of the office when you move the business can buy it and call it an asset.

All the stuff in my office was bought by the company, that does not include any structural stuff nor decorating (it is in the cellar).

D

srebbe64

Original Poster:

13,021 posts

267 months

Thursday 27th September 2007
quotequote all
Well 90% of it will be built in and not moveable. Obviously my PC, printer, chair etc.. will be bought by the company. I was just wondering whether some of the construction work could be Tax deductible. Clearly it can't!