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Use of home - can claim council tax?

MonsoonMonsoon Font Of All KnowledgeFMAAT, AAT Licensed Accountant Posts: 4,071
Stupid questionm but when calculating use of home on an apportioned basis, can you include council tax? This is one of those I ought to know, but having a real "I don't know!" moment.

Part of me says yes because it's a cost of having the premises just like rent or gas, but part of me says no as for business use it should be business rates - which you aren't going to pay on a use of home - so is the "business use" % of the council tax lost? Or can it be claimed?

thanks

Comments

  • NewbieNewbie Well-Known Registered Posts: 229
    In short yet you can, but the key here is know your home worker in terms of the occasional home worker vs dedicated, guidance on hmrc manuals BIM47800
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Thank you!
    The council tax is a tax on property. In principle it may be allowable in those instances where other property based expenses are deductible.

    In the main, the person who is carrying on a trade, profession or vocation will pay non-domestic or business rates. The existing instructions at BIM46835 apply. There will however be exceptions. For example, bed and breakfast establishments with fewer than six tenants do not pay the business rate. And a home in which a trader sets aside a room as an office is likely to attract only a council tax charge.

    Thus whether premises to which the council tax is applied are used for business purposes should be regarded as a question of fact. If business use is established the appropriate proportion of the tax may be allowed under the normal rules for the deduction of expenses.

    http://www.hmrc.gov.uk/manuals/bimmanual/BIM46840.htm
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    Say you have 6 rooms, and one is the office. Is it as simple as charging a 6th of everything as a costs? ie all utilities, council tax, mortgage (capital & interest?), repairs ie roofing work?

    What if you have half of a room used for business?

    This must be something a lot of small business miss out on.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    If you own your property you have to have non-exclusive business use, i.e. some private use, lest you open yourself up to a CGT bill on sale of property.

    Broadly speaking a UOH claim example could be total running costs for year (mortgage interest or rent, gas, electric, water, council tax etc) x 5/7 x 48/52 x 1/5

    In that example 5/7 is the number of days a week, 48/52 is number of weeks a year and 1/5 is number of rooms, 1 being the business room, and 5 being total rooms (bedroom/reception, ignore kitchen, bathrooms, hallways)
  • PGMPGM Font Of All Knowledge Registered Posts: 1,954
    Thanks Monsoon, thats handy to know. I hadn't considered the 5 days per week calculation.

    Does anyone try and claim the room 7 days a week, 52 weeks a year? Arguing you wouldn't take the office furniture out to use it as non business?
  • FireraiserFireraiser Feels At Home Registered Posts: 91
    PGM wrote: »
    Thanks Monsoon, thats handy to know. I hadn't considered the 5 days per week calculation.

    Does anyone try and claim the room 7 days a week, 52 weeks a year? Arguing you wouldn't take the office furniture out to use it as non business?

    Yes I have done in the past, without any problems. At the time I was renting, so the CGT issue didn't raise its head. I didn't actually use the room for non-business purposes, apart from occaisionally dumping stuff in there out of sight when someone came round. no idea how I'd have proved that I didn't use it for personal use though.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    PGM wrote: »
    Does anyone try and claim the room 7 days a week, 52 weeks a year? Arguing you wouldn't take the office furniture out to use it as non business?

    Yes. I do not normally adjust for 5 out of 7 days unless client specifically wants me too. I know I never worked 5 out of 7 days when I was at home.

    If you start reducing the apportionment on that basis then presumably you would also reduce it by 7.5/24 hours worked in the day?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    If you start reducing the apportionment on that basis then presumably you would also reduce it by 7.5/24 hours worked in the day?

    No, because 8 hours a day people are asleep!

    I've used 5/7 or 6/7 or even 7/7 depending on actual usage. I guess it depends on whether it's actively used for non business at the weekend (for example) or whether the non-business use is incidental.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Monsoon wrote: »
    No, because 8 hours a day people are asleep!

    Ok, so weekday sleeping is business use but weekend daytimes are not?

    I don't follow the logic.
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Me neither now :(

    I suppose the argument for not using 7 days is that if all 7 days are being claimed, where is the non-business use? 7/7 implies full time business use, meaning possible CGT in the case of an owned property. If the non-business use is incidental (the classic golf clubs being stored there) then would HMRC not want to see this reflected in the % claimed somewhere?

    On a similar note I am pretty sure at one point I was told that HMRC won't allow 52 weeks as everyone is entitled to holiday and they expect people take it (!!!).

    On reflection, my UOH calculations are the same as when I was a trainee and after this thread I am going to look into them further as I may decide I can be more generous than the method I was taught when I trained. Thanks for the thinking point.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    What I tend to consider is that the office is an office regardless of whether someone is physically in it or not. The server is still hosting, the fax machine is still on, the answer machine connected etc..

    If there is some private use of an office (which of course there ALWAYS is for a mortgaged/owned property!) then I prefer to calculate that time as a proportion of the whole and deduct it, rather than work out the physical business presence as a proportion of the whole and add it.

    If that makes sense?!
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    If that makes sense?!

    I think so. So, e.g. -1% of the total to reflect private use? :D
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    When calculating the number of rooms for UOH do you include kitchens and bathrooms, or exclude them? i.e. if there's a 3 bedroom home + kitchen + bathroom, is the proportion 1/3 or 1/5?

    Also, re: time apportionment; do you have to calculate a charge for the week, i.e.
    (mortgage int/rent + council tax + l&h + water)*(1/5)/52 = weekly cost
    weekly cost * (hours worked per week/total hours per week) = weekly charge
    weekly charge * 52 = annual charge?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Reader - see above Dean's methodology for hours worked (answer: no)

    Bedrooms/ Reception rooms only. Ignore kitchens, bathrooms, hallways, utilities etc.
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042
    Thanks Monsoon

    Do you know why we do not have to include kitchens, etc.

    And why we should/are allowed to include non-business hours & weekends in the UOH calculation?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    Don't know and don't know! As you can see from the discussion between myself and Dean, there is debate as to how to accurately apportion the use of rooms used non-exlcusively for business.

    The way I see it is that my office (I rent commercial premises) is permanently business use, even when I am not in it. In the evenings, it is still an office; at the weekends, it is still an office.

    Thus I do not think the 8/24 hours fraction is fair, as if the room is not being used, and its primary purpose is business, then arguably it is still being used for business. The apportionment is between business and private use - not between business and non-use. That I believe is an important distinction.

    As discussed above, in the case of owned property, no room should ever be exclusively business use, and thus some add-back to reflect private use is required. Different practitioners will have different methods that they feel is fair and reasonable for making that apportionment.
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