Use of home - What is the difference between these two links?

[TheCyclingProgrammer]

What I don't get about the rental agreement is that HMRC use the % of floorplan (or is it % of number of rooms?) X % of the time used for company business. A normal rental agreement does not say you rent a room from 9-5 but the owner can have it back at night time, that seems odd to me.

A residential one might not, but a business let might. Why not?

If I'm renting MyCo a room, that should be MyCo's room - but we talk about CGT and duality of use. Nobody in their right mind would rent an office space from a guy who said "oh by the way, I might let friends sleep in the room sometimes" It seems a bit contradictory.

The dual purpose/PRR thing seems like a bit of a grey area but everything I've read and been advised says that as long as its not exclusively for business purposes (e.g. you built an extension soley for business use) then you're PRR should be protected.

That said, I can't even find the HMRC page I used to calculate things - it gave 4-6 worked examples e.g. "you live in a 5 bedroom house and work 2 days a week from a dedicated home office". I'm fairly sure this didn't talk about rental agreements - that page linked at the start of this thread looks new. Perhaps the system changed - I can't even find the link in old emails grr.

As jamesbrown said earlier, if you're self-employed you have things a bit easier. Whilst employees can only claim for the *additional* cost of working from home (or a flat rate of £4/week), if you're self-employed you can reasonably apportion your existing household expenditure.

As employees/company directors we can't hence if you need/want to claim more than the additional cost of working from home you need to formalise a rental agreement and charge a rate of rent that reflects the costs you can reasonably deduct as expenditure.

You say you have an "informal" agreement with YourCo but that's unlikely to cut it. Either YourCo is renting the space from you or its not. If it is, that means you need to declare the income on your self-assessment as rental income (which could be split between you and a spouse if you both own the house potentially) and also make any claims for deductions. Likewise HMRC would probably want to see a rental agreement as evidence on both sides (to support YourCo's corporation tax deduction and your rental income).

If this all sounds like a lot of pointless faff...well it is for most people. You need to run the numbers and see if it would actually be worthwhile doing. jamesbrown and I disagree on whether it would be worth doing for somebody working 100% from home but the reality is you have to work out your own numbers and see if it would be worth it.

It's not something I've ever bothered with to be honest.

[d000hg]

Aha, found the link I was looking for - or one nearly identical. BIM47825 examples; it's the top googleresult when I search "HMRC use of home". Note some of these examples explicitly mention people running small businesses and others don't.

Then we have BIM47815 - Specific deductions: use of home: apportioning the expenditure. This starts by saying

This page and the examples at BIM47825 explain how to apportion expenditure where a self-employed person’s home is used partly for trade and partly for other purposes.

But then BIM37600 - Wholly and exclusively: duality of, or non-trade, purpose: travel costs: contents muddies the water further:

To qualify for a deduction from trading profits under S34(1)(a) ITTOIA 2005 (for unincorporated businesses) and S54(1)(a) CTA 2009 (for companies), the trade purpose of the expense must be the sole purpose.

I got tired at this point so I don't know where we stand! All these BIMs are giving me headache, it seems HMRC have several parallel schemes all worded differently!

[TheCyclingProgrammer]

If it helps, the BIM pages (Business Information Manual) relate to expenses incurred by businesses, i.e. sole traders, partnerships and corporations. Some sections only relate to self-employed businesses.

The EIM pages (Employers Information Manual) cover employee expenses.

This might be why you are getting confused. When an employee receives an expense payment that isn't exempt (e.g. mileage), it is normally reported on the P11D and treated as a taxable payment unless relief is available which we would normally then claim on our self-assessment as "business expenses".

This is different to a sole trader deducting business expenses to calculate their taxable profit and the rules for each are different.