Discussion
Minnsy said:
Just filling in details.. I work from home (but am employed), am i right in thinking I can claim 20% of council tax, 20% of eletricity and 20% of gas? And if so,I presume it would fall under 'other expenses and capital allowances'
Thanks in advance..
David
Where did you get the "20%" figure from?Thanks in advance..
David
There is no such rule in HMRC legislation.
Employees can only offset expenses against their employment income if the expenses were incurred "wholly, exclusively and NECESSARILLY" in the course of your employment.
Therefore, you could only claim a "Use of Home as Office" expense if working at home was part of the terms of your employment. This is to satisfy the "necessarilly" rule. If you CHOSE to work at home then the claim would fail as it was not a necessary part of your employment.
If you ARE able to make the claim, you need to work out a fair and equitable method of calculating the amount. The Revenue suggest the following -
add together the following costs -
light and heat costs
council tax
water charges
any other "domestic" costs
Work out the number of habitable rooms in your house (ignore hallways, loos, bathrooms, utility rooms and garages). Divide the total of the above listed costs by the number of habitable rooms.
So, if your domestic running costs came to £2,000 per annum and your house had five habitable rooms (three bedrooms, a living room and a kitchen), then you would be able to claim £400 (£2,000 x 1/5)
Edited by Eric Mc on Tuesday 13th October 17:56
Eric Mc said:
Where did you get the "20%" figure from?......
So, if your domestic running costs came to £2,000 per annum and your house had five habitable rooms (three bedrooms, a living room and a kitchen), then you would be able to claim £400 (£2,000 x 1/5)
Hmmmmmm So, if your domestic running costs came to £2,000 per annum and your house had five habitable rooms (three bedrooms, a living room and a kitchen), then you would be able to claim £400 (£2,000 x 1/5)
20% or 1/5, not sure which I'd prefer....
Just spoke to the Tax office, and if you are employed, and work from home, you can claim £3 per week, plus potentially a proportion of water/heating etc, however to find out how this proportion might be worked out I would have to be put on hold yet again, and frankly life's too short.....
I mentioned the 'costs divided by the number of rooms' scenario to them, but they insisted this was just for self-employed people...
I mentioned the 'costs divided by the number of rooms' scenario to them, but they insisted this was just for self-employed people...
2 sMoKiN bArReLs said:
Eric Mc said:
Where did you get the "20%" figure from?......
So, if your domestic running costs came to £2,000 per annum and your house had five habitable rooms (three bedrooms, a living room and a kitchen), then you would be able to claim £400 (£2,000 x 1/5)
Hmmmmmm So, if your domestic running costs came to £2,000 per annum and your house had five habitable rooms (three bedrooms, a living room and a kitchen), then you would be able to claim £400 (£2,000 x 1/5)
20% or 1/5, not sure which I'd prefer....Minnsy said:
Just spoke to the Tax office, and if you are employed, and work from home, you can claim £3 per week, plus potentially a proportion of water/heating etc, however to find out how this proportion might be worked out I would have to be put on hold yet again, and frankly life's too short.....
I mentioned the 'costs divided by the number of rooms' scenario to them, but they insisted this was just for self-employed people...
They are talking nonsense, in my opinion.I mentioned the 'costs divided by the number of rooms' scenario to them, but they insisted this was just for self-employed people...
The nature and level of costs incurred when working at home are not dictated by whether you are "employed" or "self-employed". What is dicated is the allowability of the claim - due to the word "necessarilly" being inserted in the test applicable to employees' expense claims.
The method I mentioned is equally applicable to both employed and self-employed individuals - and no HNRC officer would reject a claim made on that basis as it a fair and reasonable way of working it out.
Did you ask them what piece of tax legislation they obtained the "£3 per week" figure they arived at?
There is a figure of £2 per week that they allow an employer to pay to YOU on which YOU won't suffer PAYE - but that is nothing to do with you claiming tax relief on a proprtion of domestic costs.
Edited by Eric Mc on Wednesday 14th October 17:12
Hi Eric,
The reference they gave to this was EIM32760 which to a layman like me means not a lot...
They also suggested there was legislation to support this - I will take your advice on this and claim according to your calculations. If questions, I will say 'Eric from Pistonheads told me it was ok'
The reference they gave to this was EIM32760 which to a layman like me means not a lot...
They also suggested there was legislation to support this - I will take your advice on this and claim according to your calculations. If questions, I will say 'Eric from Pistonheads told me it was ok'
Minnsy said:
Hi Eric,
The reference they gave to this was EIM32760 which to a layman like me means not a lot...
They also suggested there was legislation to support this - I will take your advice on this and claim according to your calculations. If questions, I will say 'Eric from Pistonheads told me it was ok'
The worse they can do is refuse the claim The reference they gave to this was EIM32760 which to a layman like me means not a lot...
They also suggested there was legislation to support this - I will take your advice on this and claim according to your calculations. If questions, I will say 'Eric from Pistonheads told me it was ok'
You can see from the current set of guidelines issued to HMRC that they are instructed to accept without question claims for "Use of Home" that equate to £3 or less per week. In other words, the tax payer is not obliged to keep any supporting evidence for such small claims. The important point is that larger claims can be made - but the tax payer MUST keep detailed recotrds of how they calculated the claim and why they think it is justified. Therefore, the methodology mentioned by me earlier in the thread is perfectly acceptable as long as the underlying evidence is retained and the "wholly, exclusively and necessarilly" test is satisfied.
Below is a straight quote from the HMRC staff guidelines -
"It may be difficult for employees to calculate the exact amount of the allowable additional costs that they have incurred as a result of working at home. For ease of administration, from 6 April 2008 you may accept that employees who satisfy the conditions for relief (see EIM32760) are entitled to a deduction of £3 (exclusive of the cost of business telephone calls) for each week that they are required to work at home, without having to justify that figure. Employees who wish to deduct more than £3 per week will be expected to keep records and to be able to show how their figure has been calculated.
For 2006-07 and 2007-08 the guideline rate was £2 per week".
Note also the repeated use of the word "guideline". That means that NONE of these amounts, rates, etc are fixed in stone in any tax legislation anywhere. They are "guidelines" only - not hard and fast rules.
Edited by Eric Mc on Thursday 15th October 09:51
That £3 is the amount that an employer can pay without the employee incurring any tax liability isn't it? So it depends on your employer paying up.
It's a bit strange, as our advice, and our practice, is to claim £300/year as expenses from the company, which of course is £6 per week. Perhaps our accountant misunderstood the application of the number 3!
It's a bit strange, as our advice, and our practice, is to claim £300/year as expenses from the company, which of course is £6 per week. Perhaps our accountant misunderstood the application of the number 3!
Deva Link said:
That £3 is the amount that an employer can pay without the employee incurring any tax liability isn't it? So it depends on your employer paying up.
It's a bit strange, as our advice, and our practice, is to claim £300/year as expenses from the company, which of course is £6 per week. Perhaps our accountant misunderstood the application of the number 3!
Did you not read the guidelines I have just posted up?It's a bit strange, as our advice, and our practice, is to claim £300/year as expenses from the company, which of course is £6 per week. Perhaps our accountant misunderstood the application of the number 3!
I think it is absolutely clear to me. I've been an accountant for 33 years by the way, so have made countless claims of this nature. I have only ever had one claim queried and even then, although we had to reduce the claim somewhat, the actual methodology of how the claim wwas calculated was not questioned, just some of the values used.
Any claim can be made as long as it satisfies the criteria for making a claim.
Revenue practice is that they will NEVER raise queries or investigate any claims that equate to £3 per week or less.
They MIGHT investigate queries for higher amounts but that does not mean that those claims will not be allowed. As I keep saying, as long as the claims being made satisfy the "wholly, exclusively and necessarilly" test and back up documentation regarding how the costs were calculated, the claim will stand a good chance of being accepted.
At the end of the day, "reasonableness" will also come into it as well and what constitutes "reasonableness" is NEVER set out in the actual legislation. It is up to the tax payer and the tax inspector to decide what they think "reasonabloeness" in these circumstances actually is.
The example I quoted above is still a valid way of working this cost out - despite what the OP was told by the tax official over the phone. The tax official obviously wasn't reading his own In-House "guidelines".
RizzoTheRat said:
My accountant advised me (limited company registered at my home address) to go for the £3/week option. Isn't there the risk of some capital gains issues if you class part of the house as work property and the house goes up in value?
No.Unless you have seriously converted a part of the house into a dedicated non-residential/business area i.e. workshop, office suite, reception area, studio etc, then you will NOT have any CGT issues. As long as the room can be converted back to a bedroom or kitchen or living room at fairly short notice you have nothing to worry about.
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