Tax relief on "Use of Home as Office"

[Muppetz]

In these hard times I have been looking at all my finances and one area I think I may have made progress in is tax relief on the use of a home office.

I am self employed (with PAYE staff) and work from home, using a bedroom as an office (with workstation PC, Accounts PC, desk, fax, copier, files, storage, and a Bed...) and I use the Garage to store cable, phones and other work stock (as well as a fridge freezer and other typical garage stuff)

As I understand from the HMRC I should be able to claim a proportion of my mortgage interest, council tax, electric, gas etc against my tax liability.

A calculation based on 10% of these gives a claim in the region of £850 per year and I would think 10% a reasonably conservative estimate of the actual percentage of the house used for business and the related costs.

The reason for all this rambling is to ask if anyone here has any personal experience of claiming this (HMRC only published their revised and clearer rules in June 2008 so perhaps not) and if so how well were your claims received by the tax man ?

I also understand that this can be back claimed for the previous 6 years.... (assuming the situation has been the same !)

I would be interested in others experiences !

reference : http://www.bytestart.co.uk/content/taxlegal/9_7/claiming-mortgage-interest.shtml
http://news.bbc.co.uk/1/hi/programmes/working_lunch/7459639.stm

 

[bigbobs cl]

I used to do it when i worked from home, totally acceptable by the Tax Man. Not sure of % that my accountant claimed back though.

Bob

 

[imadoofus]

You can find yourself at risk of CGT on the 'business' portion of the house if you sell...

 

[Muppetz]

You can find yourself at risk of CGT on the 'business' portion of the house if you sell...

Not according to the clarification made by HMRC as referenced in the 2 links I provided.

 

[Ade B]

Speak to your accountant (if you have one), I think we are claiming a percentage of the floor area which equates to about 1/6th of the fixed bills for Mrs B when she works from home - we have a 2 bedroom flat though so not a lot of floor area to begin with compared to a house. Our accountant seems to think that this amount will not incur CGT.


Ade

 

[Beetnik]

I've claimed it for years and it's never been questioned - although on a more modest scale (£300). I work on the basis of not pushing things to the limit when it comes to HMRC.

 

[crockers]

If you're running a business from a domestic home -- do you need to inform the council ? Was wondering about domestic rates versus business rates....A friend got reported for doing this to the council and had a visit from them...they deemed the use of one room was ok to remain as domestic ...but it is always wise to get this in writing...

 

[janner]

The fact that you need to ask suggests to me that you need a new accountant. Of course you can claim; just keep the figure lowish so that the tax man doesn't try to make you pay capital gains tax when you sell the house.

You don't need to inform the council.
Edit..

As I understand from the HMRC I should be able to claim a proportion of my mortgage interest, council tax, electric, gas etc against my tax liability.

You don't need to itemise the cost just claim "Use of home as office - £400" or whatever amount your accountant suggests.

 

[Dryce]

Speak to your accountant (if you have one), I think we are claiming a percentage of the floor area which equates to about 1/6th of the fixed bills for Mrs B when she works from home - we have a 2 bedroom flat though so not a lot of floor area to begin with compared to a house. Our accountant seems to think that this amount will not incur CGT.

Have to watch your home insurance as well.

Conditions vary but I can recall one insurer that put a limit of 10% of the house being used for business in order to maintain cover on the contents.

 

[verytalldave]

My accountant has always strongly advised me to not to use my home for any kind of tax relief for the very reason given above by Imadoofus.
So I haven't.

 

[Piff]

My accountant puts in a nominal £300 a year.

 

[Ade B]

Have to watch your home insurance as well.

Conditions vary but I can recall one insurer that put a limit of 10% of the house being used for business in order to maintain cover on the contents.

When we had a live/work unit, we had a special policy which covered us for visitors and staff.

We have no home business visits now as we have offices up the hill, so not required.

Re the council, provided there are not 20 of you running a pizza delivery it should be ok.

There seems to be an interpretive element to the tax laws, so as advised - get your accountant to confirm.

Ade

 

[manalishi]

Same as the others - accountant handles it and I get some relief. And there's no CGT-related issue - at least for the typical office-at-home scenario.

Non-tax tangent: the issue I came across was a stupid covenant on the house which forbade any type of business happening on the premises. That was on a bog-standard surburban semi built by Laings in the 1930s. Seen the same clause twice now. Fortunately, the covenants' beneficiaries have since vanished into the ether, so it made diddly squat's worth of difference (although when I sold that house, the buyer's solicitor whinged about me having worked from home... until I pointed out that there were other buyers with less squeamish solicitors)

 

[Rory]

Not sure where it comes from but we, too, were told £300/yr would be accepted without question.

 

[Muppetz]

Thanks for the replies so far

I do have an accountant, and am meeting with him on Monday, he has always advised against claiming for "use of home as office" due to CGT, however as per the 2 links I provided in my post HMRC have now clarified that this is not an issue and that you can back claim for 6 years.

I was interested to hear others experiences (especially in the light of the 2 links I gave)

 

[Meldrew2]

My accountant advised me in the 1980's that partial use of the whole home (ie phone calls from hall, paperwork in dining room, meetings in lounge) does not attract capital gains, but setting aside part of the home - say one room (ie spare bedroom) for business use (ie dedicated office) can attract captal gains.

 

[janner]

The amount claimed is reasonable in relation to the business...

The revenue are just clarifying what has always been the case. You can claim use of home as office and provided the amount is small then GCT is not payable.
Have you been using your current accountant for long? Maybe your business has outgrown him?

 

[Peterdon]

As an accountant in practice I advise any client who genuinely works from home to claim "use of home as office." In fact I tend to put the figure in the clients' accounts for them. It is important not to go overboard with the amount claimed. The maximum I claim is £1040 per year, but ususlly it is closer to the £520 mark.

When claiming any estimated expense it is always advisable to remember the tax man is an ordinary bloke who lives in an ordinary house, drives an ordinary car (apologies if any HMRC people are members here), is married with 2.4 kids and as a result knows exactly how much it costs to live!!

 

[Ronnie]

Do the same rules apply if you are not self-employed and are an employee but spend maybe one or two days per week working from home ...

 

[HughJarse]

Do the same rules apply if you are not self-employed and are an employee but spend maybe one or two days per week working from home ...

Teachers used to be able to do this, but Im sure they stopped for some reason.
Maybe Peterdon could add to this point?