HMRC increase the Home Office allowance

[russell]

£4 a week, meh!

[Nixon Williams]

I was always confused how these set of rules fit in with the other set of rules that cover expensing the % of your utilities & rent/mortgage payments according to the % of your home's floorspace used for an office. They seem like two entirely separate things... the former appears to talk about EXTRA costs (e.g. lights being on for more hours) due to being at home.

If the self-employed carry on some of their business from home, then some tax relief may be available. HMRC accept that even if the business is carried on elsewhere, a deduction for part of the household expenses is still acceptable provided that there are times when part of the home is used solely for business purposes. To quote:

“If there is only minor use, for example writing up the business records at home, you may accept a reasonable estimate without detailed enquiry.”

So that there is no confusion, ‘wholly and exclusively’ does not mean that business expenditure has to be separately billed or that part of the home must be permanently used for business purposes. However, it does mean that when part of the home is being used for the business then that is the sole use for that part at that time.

HMRC accept that costs can be apportioned but on what basis? Well, if a small amount is claimed then HMRC will usually not be too interested. In fact, HMRC accept that an amount of £3 (soon to be £4)per week with no great record keeping or other
requirements. However, if more is to be claimed then HMRC suggest that the following factors are considered:

• the proportion in terms of area of the home that is used for business purposes
• how much is consumed where there is a metered or measurable supply such as electricity, gas or water and
• how long it is used for business purposes.

What sort of costs can I claim for?

Generally, HMRC will accept a reasonable proportion of
costs such as council tax, mortgage interest, insurance,
water rates, general repairs and rent, as well as cleaning,
heat, light and metered water.

Other allowable costs may include the cost of business calls
on the home telephone and a proportion of the line rental,
in addition to expenditure on internet connections to the
extent that the connection is used for business purposes.

HMRC accept that a £3/£4 per week expense claim is acceptable without too much formality. However, to justify a higher payment, the message is, prove it!

Our recommendation would be to claim the £3/£4 - the extra work and possibility of having to justify a higher claim is generally not worth it.

Alan

[SallyPlanIT]

What sort of costs can I claim for?

Generally, HMRC will accept a reasonable proportion of
costs such as council tax, mortgage interest, insurance,
water rates, general repairs and rent, as well as cleaning,
heat, light and metered water.




Alan

I think you'll find the rules changed for service companies
Other expenses: home: household expenses: expenses that are not deductible

[Nixon Williams]

I think you'll find the rules changed for service companies
Other expenses: home: household expenses: expenses that are not deductible

I think this relates to the case, Baird v. Williams (no relation!), which concerned an employee rather than an officer of a company.

I would rely on the following.

Specific deductions: use of home: specific expenses

Having said that, I would generally advise against this route as not being worth while.

For contractors using a limited company there is the option to draw up a rental agreement, but again I would porbably not recommend this for most people. Anyone interested in this, there is a factsheet on our website that describes it in more detail.

Alan

[SallyPlanIT]

I think this relates to the case, Baird v. Williams (no relation!), which concerned an employee rather than an officer of a company.

I would rely on the following.

Specific deductions: use of home: specific expenses

Having said that, I would generally advise against this route as not being worth while.

For contractors using a limited company there is the option to draw up a rental agreement, but again I would porbably not recommend this for most people. Anyone interested in this, there is a factsheet on our website that describes it in more detail.

Alan

If you follow my link and go back over the previous pages, you find this page which is directed specifically as service companies and provides several examples of computer contractors.

Other expenses: home: working from home: service companies

[psychocandy]

Christ man. I hope you have a good accountant cause your grasp on your accounts is bloody rubbish.

WHS+1. Must admit the poster confused me with talk of payroll - WTF is he on about?

[psychocandy]

Extra £1 a week = £52 a year = £10.40 saved in CT. Cheers HMRC.

[Zoiderman]

I believe the only people in the UK with a legal right to enter your home at any stage, is HMRC and the Customs and Excise peeps. I genuinely think these chaps can just wander in and out at whim. I think Ofcomm peeps can, and Planners. All without warrants.

[escapeUK]

£4 a week, meh!

And dont forget you are only actually saving the tax element of that £4.

[d000hg]

Our recommendation would be to claim the £3/£4 - the extra work and possibility of having to justify a higher claim is generally not worth it.

Alan

What would you advise someone who actually works from home, rather than claiming they run a home office for business admin? I've nearly always worked at home - both for paying clients and on my plan B - so I expense £100/month which is 10-15% of the house's 'running costs', on the basis one room in the house is set aside as my full-time office.