Reply to: Home Office / Dividends

[xoggoth]

Some while back had a free taxtip from http://tax.indicator.co.uk to effect that you could claim more than £2 pw if you had a proper rent agreement. There is a sample agreement on TX 05.14.02D

[backlight]

Adrian – you are correct, it is easy for anyone to prise or criticise a firm on this forum. I would not suspect you would have written a response such as this if I was to commend your firm? At the end of the day what you are suggesting is that no one take positive or negative advice as it may be biased. I would not image you would want to forgo all of your clients who are with you today because of positive comments made in these forums?

That said I am sure you have many satisfied past and present clients if you have been in business for 11 years. I commend you for that. I am simply stating my experience was not as positive as hyperD’s

I also did not feel it was necessary to go into specifics in a public forum, I was simply providing a brief overview of my experience – if you would like to PM me your personal e-mail address I would be more than happy to address my concerns with you.

[ADRIANL]

Backlight: it is too easy for you, and others,to use this forum to vaguely and anonymously criticise a firm. We do not know if you are genuinely a client/ ex client of ours, a competitor or someone with a vested interest elsewhere.
If you reveal more, and are measured and polite, I will post a full response.
PlanIT are not beyond criticism; without constructive feedback we have no basis on which to make improvements, but as a firm of Chartered Accountants who have operated in this market for 11 years with many long term loyal clients we can't be doing such a bad job.
With regard to the specific thread, there are instances in which "standard" advice is given to clients in the first instance as we know from experience that this is what they require. If we have failed to be more specific in this case then that is a failing we will address. I will personally look in to the advice given to hyperD.
Adrian Learer
PlanIT Services Limited

[backlight]

I use planIT, which are an extremely good accountancy firm

For the record I do not have the same level of praise for this firm.

Further why would you have to change your tax situation - should PlanIT have not advised you of this in the past - I think a good accountancy would be proactive in recommending tax efficient practices.

Something this firm does not seem to do.

[hyperD]

Many thanks for the replies and comments, I will start looking into making the tax changes now.

I use planIT, which are an extremely good accountancy firm and I thoroughly recommend them (and have used them for 8 years and always tell any contractor to use them), but as my operations have moved me out of the standard contracting field, some of these areas of tax and operations are a little more specialised and it's difficult to get a good standing of these issues.

[sathyaram_s]

Why not prove? You have stuff in your office that you are unlikely to have if you are a perm or a typical contractor ... And you clearly work from home , ie, you do not claim travel expenses on a daily basis ...

BTW, if you are using a contractor specialist accountant, please change the accountant to one who knows your type of circumstances better ...

unless I can prove otherwise.

[backlight]

Yes, you need to enter into a proper agreement/licence for your company to use your premises and pay the market rate. On your personal tax return you will have rental income and then you can offset the proportion of all your household costs, inc mortgage interest or rent, utilities, insurance, even repairs & renewals if applicable to any part of the building used by your business. What you CAN'T do is claim rent, interest or any fixed costs directly as use of home as office - see my links above which clarify that for a director/employee, the only "expenses" claim is the EXTRA costs incurred by using your home (i.e. no proportion of fixed costs at all). So if you rent/licence part of your house, you can claim all costs, but if you are just claiming an expense for UOHAO, it is only the extra costs you can claim, or £2 per week. The answer of course is to enter into a proper licence/rent agreement. CGT will be an issue, but if you're just using say 1 or 2 rooms of your house, say 1/5th for arguments sake, then there is only CGT on 1/5th of the gain, less upto 75% business asset taper relief, less annual exemption, so you'd need to make a hell of a profit before you'd be liable for CGT.

Thank you for the concise response. I will enter into a rental agreement with my limited company for 1/3 of my flat - the portion I utilise for business purposes. I will then claim this rent as a tax deduction against the limited company and claim the income on my personal tax return. As the net income on the personal side will be less than net expense there will be no additional tax payable.

Seems fairly straightforward - especially for renters as there are no CGT implications.

[philip@wellwoodhoyle]

This is a problem I have with my accountant - she says £2/week unless I can prove otherwise.

I run a totally dedicated room in our house (equipment, a/c to cool servers and room, CAT 6 cabling, cooled server cabinets, office furniture, monitors and seating capacity for clients) and it's not the dining room etc

All work is done here (I'm direct with several clients, purchase orders, no agencies, fixed price) and I'm not "contracting".

It looks like an office, it is an office and it's in the house. The accountant is always worried about the capital gains tax issues if we sell the house.

As with alot of this regulation, not one particular person has the faintest idea - it's "all interpretation". Well, I don't want interpretation, I want clear facts.

Using some of these guidelines I reckon it's about £30-40/month.

Anyone got any idea with a similar setup?

Yes, you need to enter into a proper agreement/licence for your company to use your premises and pay the market rate. On your personal tax return you will have rental income and then you can offset the proportion of all your household costs, inc mortgage interest or rent, utilities, insurance, even repairs & renewals if applicable to any part of the building used by your business. What you CAN'T do is claim rent, interest or any fixed costs directly as use of home as office - see my links above which clarify that for a director/employee, the only "expenses" claim is the EXTRA costs incurred by using your home (i.e. no proportion of fixed costs at all). So if you rent/licence part of your house, you can claim all costs, but if you are just claiming an expense for UOHAO, it is only the extra costs you can claim, or £2 per week. The answer of course is to enter into a proper licence/rent agreement. CGT will be an issue, but if you're just using say 1 or 2 rooms of your house, say 1/5th for arguments sake, then there is only CGT on 1/5th of the gain, less upto 75% business asset taper relief, less annual exemption, so you'd need to make a hell of a profit before you'd be liable for CGT.

[hyperD]

This is a problem I have with my accountant - she says £2/week unless I can prove otherwise.

I run a totally dedicated room in our house (equipment, a/c to cool servers and room, CAT 6 cabling, cooled server cabinets, office furniture, monitors and seating capacity for clients) and it's not the dining room etc

All work is done here (I'm direct with several clients, purchase orders, no agencies, fixed price) and I'm not "contracting".

It looks like an office, it is an office and it's in the house. The accountant is always worried about the capital gains tax issues if we sell the house.

As with alot of this regulation, not one particular person has the faintest idea - it's "all interpretation". Well, I don't want interpretation, I want clear facts.

Using some of these guidelines I reckon it's about £30-40/month.

Anyone got any idea with a similar setup?

[Pickle2]

ok found the link from post #15
why have SJD not informed me about rule change
got to confirm with them

Im not sure, the whole area seems wooly and full of contradicting advice.

Please post back if you manage to get anything back from SJD.

Or simon, if you are reading this, please cast us a pearl of you wisdom.

[Andy2]

ok found the link from post #15
why have SJD not informed me about rule change
got to confirm with them

[Andy2]

Hmm, when. Recently, ie since the suposed rule change, or was this a few years back?

hmm it was 2 years back. They haven't updated me if the rules are different now. Any linky for the rule change ?

[Pickle2]

advised by SJD

Hmm, when. Recently, ie since the suposed rule change, or was this a few years back?

[Andy2]

Advised by whom?

I think that is the point of the thread. Since last year this is no longer an allowable claim for a limited company director.

Or is it? Confused.

advised by SJD

[Pickle2]

Even though I seldom work from home ,I need some place to keep company's files and computer , which is a part of my home used by my ltd company.
I was advised to divide (rent+utilities) by the number of rooms in flat , which can be claimed.
hth

Advised by whom?

I think that is the point of the thread. Since last year this is no longer an allowable claim for a limited company director.

Or is it? Confused.