Reply to: Using home as office expense

[gwynfryn]

Gorilla have a very good guide on allowable expenses as per HMRC - their guides shows Use of Home is an allowable expense of £18.00 per month - £216 per year. Either claim £18.00 at the end of each month (that's what I do) or a one off claim for £216.00 at the end of the tax year. Anything else is prone to HMRC getting interested I assume.
P.S. I am a director of a limited company (like most of us on here are).

[northernladuk]

from your link:


This had me thinking that co employees/directors were being seen as self employed for the purposes of this claim but I fully accept that the overview spells it out very clearly. Shame.

I'd rather take it from the Gov guidelines where it is in black and white over the belief of an accountancy firm I don't know.

It does mention extensively as well which generally we don't.

[MrC]

Here you go. Couple of seconds on Google got this.

Contractors’ Questions: How much to claim for my home-based office?

from your link:

Based on plain reading, it would appear that only the self-employed can claim home-as-office expenses and not directors of limited companies. However, we strongly believe that many directors of small companies do use their home-as-office extensively for business use and that, therefore, these individuals can be classified as self-employed.

This had me thinking that co employees/directors were being seen as self employed for the purposes of this claim but I fully accept that the overview spells it out very clearly. Shame.

[TheCyclingProgrammer]

something i heard on a podcast recently made my ears prick up.

They said that you can claim up to £26/month if you work enough hours froma home office. This obviously trumps £52/quarter. Googled it and this seems to confirm:

Simplified expenses if you're self-employed: Working from home - GOV.UK

am i looking at the wrong thing or is this a new change?

1. Those are the simplified rates for the self-employed, not employees or company director's (which most of us are)
2. If you're self-employed and work from home full time you'd probably be better off using the calculation based on the proportion of your home * time spent * household costs method anyway.

[northernladuk]

something i heard on a podcast recently made my ears prick up.

They said that you can claim up to £26/month if you work enough hours froma home office. This obviously trumps £52/quarter. Googled it and this seems to confirm:

Simplified expenses if you're self-employed: Working from home - GOV.UK

am i looking at the wrong thing or is this a new change?

Isn't the answer on the overview page?

If that isn't clear then on here.
BIM47825 - Business Income Manual - HMRC internal manual - GOV.UK

The examples set out what expenses are allowable when an individual carrying on a trade uses part of their home for trade purposes. The guidance does not apply to the use of home by an employee or director - for this see EIM32760 onwards.

EIM32760 points back to the £4 a week answer.

[MrC]

I'm probably being slow but....

something i heard on a podcast recently made my ears prick up.

They said that you can claim up to £26/month if you work enough hours froma home office. This obviously trumps £52/quarter. Googled it and this seems to confirm:

Simplified expenses if you're self-employed: Working from home - GOV.UK

am i looking at the wrong thing or is this a new change?

[TheCyclingProgrammer]

Just be careful of this CGT trap.

The tax trap that's catching home workers - Telegraph

Largely overblow IMO.

1. If you're self-employed, the room doesn't need to be "wholly and exclusively" for business purposes as you can either apportion your claim based on a how big your house is and how much you use the room or claim the simplified flat rate (which is not £4/week for sole traders).

2. Similarly, if you're an employee or company director, you can claim for additional costs with calculations (only the additional amount is treated as "wholly and exclusively for business purposes") or £4/week without evidence, neither requires the room to be "wholly and exclusively" for business purposes.

3. It's unlikely that many people exclusively use a room in their house for business. Most people will have a home office which is also used for personal reasons (doing your home budget, kids doing their homework etc, spare room etc.). Even if you're like me and have a dedicated garden office or similar, it's still not exclusively used for business. I keep my guitars in mine and use it for non-business stuff.

I can't imagine there are many cases of HMRC restricting PRR for people who do clerical/computer-based work from a "home office", even one that is mostly dedicated to working from home.

[xoggoth]

Just be careful of this CGT trap.

The tax trap that's catching home workers - Telegraph

[TheCyclingProgrammer]

You can claim HMRC's guidance amount of £4 per week and they won't raise any issues with that. Most contractors just go for that. It's £208 as expenses with no questions asked. However, if you want to claim for more you can. You'd have to carry out a detailed calculation either based on floor area of your workspace or by rooms (excluding kitchen, bathrooms and hallways) to work out your business percentage. You'd have to add up the running costs of your home per annum excluding phone and internet costs, apply your "business percentage" to that, divide it by 12 months, divide it by the number of working hours your do to come up with a use of home claim higher that £4 per week. As long as you have that calculation, if HMRC wanted to inquire into it, you can present that.

It’s worth pointing out that if you use this method, HMRC say that you can only claim additional costs (with evidence). You can’t claim a percentage of existing fixed costs as an employee or director.

It is a condition for relief under Section 336 ITEPA 2003 that the expenses must be incurred “wholly and exclusively” “in the performance of” the employee’s duties, see EIM31660. In practice that means that relief can only be allowed for

the additional unit costs of gas and electricity consumed while a room is being used for work
the metered cost of water used “in the performance of the duties” (if any). As regards water rates, see EIM32820
the unit costs of business telephone calls (including “dial up” internet access).

EIM32815 - Employment Income Manual - HMRC internal manual - GOV.UK

You can’t include rent or council tax for example:
EIM32820 - Employment Income Manual - HMRC internal manual - GOV.UK

AFAIK if you want to be able to claim a proportion if these costs you’d need to go down the rental agreement route.

[SuperLooper]

If your spouse is also a director then he/she can claim the £4 a week too, for £8 total. See previous thread: https://www.contractoruk.com/forums/...ml#post2572644

[WordIsBond]

There are actually three options.

1. £4 / week. Simple, clean, easy.
2. Actual cost, based on percentage usage (percentage of floor space or rooms, and percentage of time). Expenses included mortgage interest or rent, council tax, utilities. You aren't going to hit £83 / month unless you are paying absurd levels of interest and council tax.
3. Contracted amount.

I do the third. Every year, I look at office space in my area to get a market rate. I set a price, write a formal agreement, and pay that amount. For the current year the market rate for the room I use would be over £150 / month, and we have agreed to provide it to the company 80% of the time at a rate of £120 / month (£60 each for Mrs and me, the house is owned jointly).

That's £720 each that we have to report on our self-assessment as rental income, against which we can claim expenses as above. Since we are mortgage free the expenses are negligible, so this does count as income. And it isn't eligible for the property allowance because it comes from a company which we control. But since our salaries are £700 / month, below the personal allowance, the rental income being taxable doesn't hurt us.

[Craig@Clarity]

You can claim HMRC's guidance amount of £4 per week and they won't raise any issues with that. Most contractors just go for that. It's £208 as expenses with no questions asked. However, if you want to claim for more you can. You'd have to carry out a detailed calculation either based on floor area of your workspace or by rooms (excluding kitchen, bathrooms and hallways) to work out your business percentage. You'd have to add up the running costs of your home per annum excluding phone and internet costs, apply your "business percentage" to that, divide it by 12 months, divide it by the number of working hours your do to come up with a use of home claim higher that £4 per week. As long as you have that calculation, if HMRC wanted to inquire into it, you can present that.

[TheCyclingProgrammer]

FWIW I work from home almost exclusively and even have a dedicated garden office that is used about 80-90% for work and I still only claim £4/week as I can’t be bothered with faffing around.

[TheCyclingProgrammer]

There should be one for a company surely? If I rent office space - I would expect to be able to expense that.

Company expenditure is covered by the business information manual.

Yes, your business could rent premises and treat it as a tax deductible expense in its accounts but that isn’t the same as you, a company director, claiming expenses from YourCo for use of home as an office.

If there was a rental agreement in place YourCo could rent a room from you and you may then be able to claim a bit more but this would require a rental agreement and you would need to declare the rental income and offset it with allowable costs under the rules for property income. There may also be other considerations and you’d be advised to speak to an accountant about this.

[TheCyclingProgrammer]

This link is tax relief for employees

And it also applies to company directors.

You can claim £83/month if you have evidence to support your claim that you are incurring £83 of *additional* costs per month.

Alternatively you can claim £4/week without needing any evidence.