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EMPLOYEE
As a Ltd Co director, how should I claim for use of a home office?
Previously I've been advised to add up household expenses and divide by number of rooms and proportion of time worked in the office.
Now I read that this method is only allowable for self-employed or employees, and that only 'incremental' expenses can be allowed (basically a bit of extra light and heat) even though the office is 99% used for business.
What's the real answer?
Now I read that this method is only allowable for self-employed or employees, and that only 'incremental' expenses can be allowed (basically a bit of extra light and heat) even though the office is 99% used for business.
What's the real answer?
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Inappropriate?HMRC have tightened the rules relating to claims for use of home as office and as you say you can only claim "basically a bit of extra light and heat". AlthoughHMRC will , rather grudgingly, allow the metered cost of water used "in the performance of duties, if any"! Which basically means *** all!
Rather than use this method I advise clients to charge their company a rent for use of home as office.
The following points should be borne in mind:
1. The agreement should be in writing.
2. It should be minuted by the company.
3. If the house is jointly owned the rent must be paid to all the owners.
4. The rent must not exceed market value.
5. You can deduct expenses ( a proportion of mortgage interest, insurance, etc) from the rent. Any profit left over will be subject to tax but not National Insurance and don't forget to put it on your tax return. -
Inappropriate?Ed,
If you would like a copy of a licence/rent agreement, please email me at expertise AT hrbs DOT biz and I would be pleased to provide a free copy.
Regards
Keith -
Inappropriate?Does this approach of renting premises incur Capital Gains Tax on any future sale of your home? -
Inappropriate?Hi Mike
No it doesn't because you are allowing the company non-exclusive use of part of your home. It is key that the agreement states that and you can evidence that the areas used for business have a domestic use eg storage of household items, mixed use eg kids use the area to do homework etc. If you only have very occasional visitors eg for board meetings, client entertaining then business rates won't apply.
Regards
Keith -
Inappropriate?Keith,
Thanks for this. I was considering recalculating the utility bills due to the recent increase in fuel prices, but some form of rental agreement might be a better idea.
If you don't mind, I'll drop you an email regarding the rent agreement?
Best Regards,
Mike
