Reply to: home office allowance

[Boo]

If you read the correct guidance on home expenses you'd see it is correct.

EIM32815 - Other expenses: home: household expenses: expenses that are deductible

You can only claim for additional costs, not cost you pay anyway.

You can split hairs over the general rule, it's irrelevant, there are specific rules for home expenses and they are outlined above.

You pay rent/mortgage/council tax regardless, it's clearly not for business purposes. In black and white:

Other expenses: home: household expenses: expenses that are not deductible

I'm surprised your accountant hasn't flagged this up. You've either been badly advised or you've simply been relying on the wrong guidance manual.

Well you've got me. I was relying on the advice for years up to 2005/6 which did permit those expenses to be claimed. As you say EIM32815 does specifically prohibit those being expensed nowadays.

Boo

[TheCyclingProgrammer]

This is not correct, there is a long and detailed discussion of "wholly, exclusively and necessary" on the HMRC website and it does not preclude a claim for a proportion of *any* costs (including fixed costs like rent etc) just because only a proportion of those costs are necessary to the business.

If a bill is incurred 50% through personal use and 50% through business use there is no impediment to claiming 50% as being wholly, exclusively and necessarily incurred by the business so long as that is actually the case.

Boo

If you read the correct guidance on home expenses you'd see it is correct.

EIM32815 - Other expenses: home: household expenses: expenses that are deductible

You can only claim for additional costs, not cost you pay anyway.

You can split hairs over the general rule, it's irrelevant, there are specific rules for home expenses and they are outlined above.

You pay rent/mortgage/council tax regardless, it's clearly not for business purposes. In black and white:

http://www.hmrc.gov.uk/manuals/eimanual/EIM32820.htm

I'm surprised your accountant hasn't flagged this up. You've either been badly advised or you've simply been relying on the wrong guidance manual.

[Boo]

Actually you can make personal use of business ASSETS (eg laptop) so long as that personal use is "not significant".

...

The reason broadband needs to be in the company name to make it allowable is because if it's in your name then HMRC would take the view that has dual purpose - your personal use of it is not insignificant - you clearly have it for personal purposes or it wouldn't be in your name.

This ^^^

It is also true that the personal use of business-purchased SERVICES can be deemed to be incidental if they don't incur any additional costs (like, as you say broadband) but you may need to provide evidence of use in that case.

Boo

[Boo]

The correct answer was stated at the beginning of this thread. Employees and directors can claim for their additional costs - business calls, additional utility costs etc. but not a share of fixed costs like rent, council tax, mortgage interest, broadband etc as they are not wholly, exclusively and necessary for business purposes.

This is not correct, there is a long and detailed discussion of "wholly, exclusively and necessary" on the HMRC website and it does not preclude a claim for a proportion of *any* costs (including fixed costs like rent etc) just because only a proportion of those costs are necessary to the business.

If a bill is incurred 50% through personal use and 50% through business use there is no impediment to claiming 50% as being wholly, exclusively and necessarily incurred by the business so long as that is actually the case.

Boo

[TheCyclingProgrammer]

This is a bummer. There will often be some personal use of busines assets, it is almost inevitable. My company buys a TLS cert. MAKES sense to use it on my prsonal site too, whoops that's a deal breaker.

Actually you can make personal use of business ASSETS (eg laptop) so long as that personal use is "not significant". This depends entirely on the context and doesn't necessarily relate to the percentage of use, it's more to do the reason why it was bought in the first place.

There are some examples in the HMRC manual, but the obvious example is a programmer who buys a company laptop to do their job (they can't do their job without it). This alone would make it wholly and exclusively for business purposes, regardless of what personal use there is.

In your example, if you needed the certificate for a business purpose and can demonstrate that then there should be no issue using it on your personal website as well.

The reason broadband needs to be in the company name to make it allowable is because if it's in your name then HMRC would take the view that has dual purpose - your personal use of it is not insignificant - you clearly have it for personal purposes or it wouldn't be in your name.

[TheCyclingProgrammer]

I don't doubt you but it doesn't say that anywhere. How do you know?

Clue is in the name. The business information manual contains guidelines for businesses, both incorporated and unincorporated. Some sections are specifically related to sole traders only. Some sections are applicable to company expenditure.

Employee/director expenses are covered in the Employer Information Manual (EIM pages).

The correct answer was stated at the beginning of this thread. Employees and directors can claim for their additional costs - business calls, additional utility costs etc. but not a share of fixed costs like rent, council tax, mortgage interest, broadband etc as they are not wholly, exclusively and necessary for business purposes.

If your additional costs are more than £4/week you can claim them but you need to keep evidence. Or claim £4/week and no further evidence is required.

Self employed people can claim a share of their fixed costs using a simple calculation based on number of rooms and how much is used for business. This option is not available to company directors unless they rent the room to their business and offset the rental profits by claiming allowable rental expenses.

[TheCyclingProgrammer]

You can claim on a proportion of the rent / mortgage interest on your home and I do this on the basis of 1 room of 4 (excluding bathrooms, kitchens and halls) == 25% multiplied by the proportion of the year I worked from home eg 6 months == 50% etc.

There's a list of what is allowable here : BIM47820 - Specific deductions: use of home: specific expenses

I specifically claim mortgage interest, council tax, gas, water and electricity.

Boo

None of that applies to directors or employees. Self employed only. Directors and employees cannot claim a share of fixed costs unless you go down the route of renting to YourCo.

[unixman]

You can’t claim for things that you use for both private and business use, eg rent or broadband access.

This is a bummer. There will often be some personal use of busines assets, it is almost inevitable. My company buys a TLS cert. MAKES sense to use it on my prsonal site too, whoops that's a deal breaker.

You know, vitual on screen keyboards suck. productivity is about a twentieth of a real keyboard. I would correct that lower case P but life is too short.

[jamesbrown]

I don't doubt you but it doesn't say that anywhere. How do you know?

Yeah, HMRC guidance is generally useless, especially the snippets from the BIM, because they rarely have sufficient context. Anyway, it is part of a simplified approach introduced in 2014, but for the self-employed (unincorporated). Some details here:

https://www.gov.uk/simpler-income-ta...enses/overview

[VectraMan]

No, that's for unincorporated businesses, i.e. sole traders.

I don't doubt you but it doesn't say that anywhere. How do you know?

[jamesbrown]

BIM75010 - Simplified expenses: use of home for business purposes

£26pm. Or £1.23 per day (assuming 21 days per month). And like all expenses you're only really saving 20% of that, so 25p per day. Don't think I can be bothered.

I would think you can't personally go back beyond the current tax year without creating issues over P11D etc., and that YourCo can't go back beyond the year end, certainly not if you've done the year end accounts. So it's whichever is most recent. Correct me if I'm wrong.

No, that's for unincorporated businesses, i.e. sole traders.

Also, OP, you keep repeating that it's £4 per day. It isn't. It's either £4 per week or £18 per month.

[VectraMan]

I don't really need those kind of specifics, I don't want to be counting kwh used for business or personal, I just know that as a ltd company contractor I can claim £4/day without providing evidence, yes I can claim more with evidence but I don't want to do that, I only want to know how far back I can claim that given that the business opened shop in Sept '13

BIM75010 - Simplified expenses: use of home for business purposes

£26pm. Or £1.23 per day (assuming 21 days per month). And like all expenses you're only really saving 20% of that, so 25p per day. Don't think I can be bothered.

I would think you can't personally go back beyond the current tax year without creating issues over P11D etc., and that YourCo can't go back beyond the year end, certainly not if you've done the year end accounts. So it's whichever is most recent. Correct me if I'm wrong.

[Antimus]

I don't really need those kind of specifics, I don't want to be counting kwh used for business or personal, I just know that as a ltd company contractor I can claim £4/day without providing evidence, yes I can claim more with evidence but I don't want to do that, I only want to know how far back I can claim that given that the business opened shop in Sept '13

[Boo]

Working at home
You may be able to get tax back for some of the bills you have to pay because you have to work at home on a regular basis.

You can only claim for things to do with your work, eg business telephone calls or the extra cost of gas and electricity for your work area.

You can’t claim for things that you use for both private and business use, eg rent or broadband access.

You can claim on a proportion of the rent / mortgage interest on your home and I do this on the basis of 1 room of 4 (excluding bathrooms, kitchens and halls) == 25% multiplied by the proportion of the year I worked from home eg 6 months == 50% etc.

There's a list of what is allowable here : BIM47820 - Specific deductions: use of home: specific expenses

I specifically claim mortgage interest, council tax, gas, water and electricity.

Boo

[Michael at BI Accountancy]

Be sure to check that your accountant is not putting through the allowance (that you have missed) to your DLA. This should be pretty standard for any accountant to be picking up on when preparing your accounts!