Use of Home as Office

Sue

I have started working on my own tax return.

I have noticed from my bookkeeping clients that Accountants tend to vary a lot on how much they put through for Use of Home.

I know the rules changed earlier this year and more can now be claimed, but I have noticed some Accountants still putting through the £2 a week and others putting through £5-£10 a week and these are for people who I know do very little work from home.

I was wondering what the average tends to be for someone working from home full time. I've calculated my costs to be approximately £10 a week.

Sue

deanshepherd

It varies for everyone depending on their costs and how much of their home is used for business.

For me, I have a very expensive mortgage, I work from the study, my assistant works in the conservatory, my files are kept in the spare room and I use the dining room for meetings.

I have not done the full calculation yet but I think it will be at least £2,500 for the year.

I never use a weekly rate for the self-employed. I always ask clients to give me the annual cost for their rent, rates, service charges, gas, electric, mortgage interest, council tax, insurance, repairs and maintenance and then I do a calculation based on the number of rooms used and the percentage they are utilised in the business.

paulb

I would just like to echo what Dean has said. I use exactly the same method as him for calculating the use of home provision for self-employed workers.

As a seperate issue, do people use a similar calculation for a director of a Ltd Co who works from home?

deanshepherd

Yes. I also generally get the directors to sign a standard licence agreement so that the 'rent' is formally documented.

I have also been toying with the idea of including certain ancillary services in the agreement such as the provision of telephone, fax and tea/coffee making facilities.

This would get around the restrictive recoverability of telephone costs (particularly line rental) where the agreements are not in the company's name.

Sue

Hi Dean and Paul

Thanks for your replies. I have used the method you suggested and estimate approximately £10 a week for my use of home. I know of some Accountants that put through more than this for Self Employed people who do very little at home.

I've seen the Accounts for several of my bookkeeping clients and there are several things I'm convinced are wrong.

Sue

red_devil

I always put through £50 per week and it has never been queried by the Rev

Dean

red_devil wrote: »

I always put through £50 per week and it has never been queried by the Rev

I'm VERY suprised by that!

Regards

Dean

peugeot

That's what I thought!

red_devil

If you can get away with £50 per week, then why not? It certainly keeps the clients happy!!

Dean

red_devil wrote: »

If you can get away with £50 per week, then why not?

Not what I would call professional 'integrity', but whatever floats your boat!

I think you've just highlighted the reason why people might want to continue their studies after the AAT. (Referring to a post else where on these forums).

Regards

Dean

Sue

Red_devil

I read another of your posts a little while ago saying you were looking to become an AAT MIP. Are you planning to use the same policy?

deanshepherd

Just because HMRC have not (yet) opened an enquiry it doesn't mean the client has 'got away with it'..

It sounds like a discovery assessment time bomb waiting to explode.

That said, I have seen a variety of absurd submissions 'gotten away with' over the years.

None since I have been an MIP I hasten to add!

red_devil

Oops sorry!

I meant to say £5 per week not £50! How silly of me.

Dottie

Dean

" I also generally get the directors to sign a standard licence agreement so that the 'rent' is formally documented. "

Could you tell me what information should be in a standard licence agreement?

Thanks as always

Dottie

Julia Crouch

Hi Dean,

'..directors to sign a standard licence agreement so that the 'rent' is formally documented'

I have always been schepticle of these agreements. Do you include a clause for deferred payment if the company does not have the cash?

I know that the payment of rent is deductable for CT but if the company is small with dividends covered in the BR band then surely it would be cheaper to pay a smaller dividend rather than invoking a land and propery tax iability and possible CGT on the property at some point in the future.

Does anyone ever consider CGT when calculating 'use of home as office' ( By the way I always use actuals as well and keep the calculations on file in case of challenge). I have one client who flatly refuses to add it in and would rather suffer the IT. However he does have a large house in the SE with a potential large gain attached

Julia

Dean

Here is a template for you to look at.

Julia, potentially, all those problems are there and need to be considered. Although if you are 'renting a room' then you can still be covered by the PPR.

With charging the company a rental, it's another way of getting a credit to the directors' account. The individual let reports the income on his tax return and can then claim some mortgage interest together with normal rental type expenses. You have to take into account each individuals circumstances, consisting of tax rates, thresholds, commerical reality etc.

Fors and againsts.....

Regards

Dean

deanshepherd

Julia Crouch wrote: »

I know that the payment of rent is deductable for CT but if the company is small with dividends covered in the BR band then surely it would be cheaper to pay a smaller dividend rather than invoking a land and propery tax iability and possible CGT on the property at some point in the future.

Does anyone ever consider CGT when calculating 'use of home as office'?

There is no income tax issue. You would normally only charge rent equal to the costs, thus no rental profit. You could charge more as a way of getting funds out of the company (with no NIC) if a dividend is not a viable option, perhaps if there are multiple shareholders.

As for CGT, it is just a myth put out by HMRC to scare people off!

Use of part of the property has to be 'exclusively' for business for CGT to apply. You are really looking at dentists and the like with converted extensions where private use is not possible.

Julia Crouch

Hi Dean,

Once again thank you.

I thought that was the case, putting more thought into the CGT issue I can see that now, and it makes sense, a bit like 'getting out' of business rates, the same applies.:blushing:

I should sit back and think a bit more, but as anther thread would suggest I have concerns for next year and this will obviously be something that should be inplace for all 'income shifting' setups. But from the start of the year one would hope, as opposed to retrospectively!!

Julia

PS good to see others burning the mid night oil as well. Up the workers:thumbup:

Dean

deanshepherd wrote: »

There is no income tax issue. You would normally only charge rent equal to the costs, thus no rental profit. You could charge more as a way of getting funds out of the company (with no NIC) if a dividend is not a viable option, perhaps if there are multiple shareholders.

Depending on the individuals other income we are using this method in anticipation for the new income shifting rules.... watch this space.

Regards

Dean