Working from Home

Laura8192
Laura8192 Registered Posts: 95 ? ? ?
As I am being made redundant, the company I work for are paying for a redundancy support company to help us in our quest for employment or self employment. The meetings so far have been beneficial, with plenty of hints and tips for development. I'm going on the CV courses in a few weeks to get my CV up to scratch.

One thing the "self-employment specialist" said did throw me though. He said that I couldn't claim a proportion of my bills as a home worker, but only £200 odd a year. I said I'm sure I can claim according to the number of rooms (as we learnt in AAT and as is discussed in this forum a lot) but he was adament that I should not refer to working from home in any business literature, I should state that I work from clients premises, and I should only claim the £200 odd a year as a business expense, otherwise I will fall foul of the CGT rules.

Am I missing something here? I use a spare bedroom as an office 90% of the time, when my niece, or anyone else, comes to stay it reverts to a bedroom.

I have a 3 bedroom house, with a living room and large kitchen/diner, so 5 rooms. I know the guidance says do not count kitchens and bathrooms, but I thought I should count it as it has a dining table in and is used as a dining room as well. Even so,am I right in thinking that I can claim 90% of 1/5 of my household expenses?

Should I just ignore this mans advise (which he is no doubt passing on to 100s of clients....)

Comments

  • stefanboro
    stefanboro Registered Posts: 187 ? ? ?
    Knowledge on this is slightly rusty and I am rushing but my understanding is:
    • Yes, if you claim the full home office deduction for a full room there are CGT implications
    • However, as long as you scale the amount down to a percentage that you actually use the room for in business (let's say 50% of the time) than you can avoid CGT charges

    As I said, I'm very rusty here and I await to be corrected.
  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    stefanboro wrote: »
    Knowledge on this is slightly rusty and I am rushing but my understanding is:
    • Yes, if you claim the full home office deduction for a full room there are CGT implications
    • However, as long as you scale the amount down to a percentage that you actually use the room for in business (let's say 50% of the time) than you can avoid CGT charges

    As I said, I'm very rusty here and I await to be corrected.

    Yes pretty much as it is. Just don't use any part of the home exclusively for business and avoid the CGT problems.

    Then claim a proportion of the expenses of running the home - a guide on HMRC here http://www.hmrc.gov.uk/manuals/bimmanual/bim47820.htm
    Regards,

    Burg
  • JodieR
    JodieR Registered Posts: 1,002
    This is the kind of thing which gets people all worried and yet I've never heard of a real life case where someone's been caught out on CGT for saying they use a room in their house exclusively for business. At a seminar a few years ago the speaker said that his interpretation of this is that CGT will only apply where you convert part of your house into a business 'zone' - something like a garage converted into a dentist surgery for example.
    And the second point is that even if they did come after you for CGT, by the time you've apportioned for area and time and used your annual exemption you'll probably not end up paying any CGT anyway.
    Personally I claim 11% of household costs on my tax return as the room I use as an office is 11% of the floor-space. I don't apportion for private use as it's not used for personal things, but when we bought the house the room looked like a bedroom, and when/if we sell it will look like a bedroom again once the desks & shelves are out, it's not like someone looking specifically to buy a house which they can run a business from would choose my house over next door.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    Laura8192 wrote: »

    Should I just ignore this mans advise (which he is no doubt passing on to 100s of clients....)

    Yes, ignore.

    As long as no room is used exclusively for business, there is no CGT implication.

    Does he work for the taxman?!
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    I had an interesting altercation with an inspector recently that very almost threw me.

    When providing him with my clients use of home calculation he asked whether I had considered the CGT impact when he sold the property.

    I said yes. I considered it not to be subject to CGT as no part was used exclusively for business.

    He then said for an expense to be allowable it has to be 'wholly and exclusively' for business so you are either saying it was exclusive or you are not. Which is it?
  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    So how did this end up Dean???

    I can see the point but surely the same concept as apportioning telephone for a sole trader??? being a percentage wholly and exclusively?
    Regards,

    Burg
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    It ended up with me telling him to naff off.

    However, he also tried to disallow in its entirety a store room that was used to store both business and personal items.

    His argument was that, although he accepted the office was exclusively used for business whilst my client was in there working, the store room was never used exclusively because there were always both business and personal items in there at the same time.
  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    I assume he got the 'naff off' treatment here too?!
    Regards,

    Burg
  • imeldabye
    imeldabye Registered Posts: 147 ? ? ?
    This is a great podcast from Michael Steed on working from/at home
    http://www.aat-interactive.org.uk/cpdmp3/2012/January/Michael%20Steed/Tax%20Reliefs%20of%20Working%20At%20Home.mp3
    if the link doesn't work it's in Jan 12 podcasts in CPD
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    burg wrote: »
    I assume he got the 'naff off' treatment here too?!

    Yes he did but it did make me stop and panic for a while.
  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    I think the traditional use of home (as in your scenario 1) should be pretty robust particularly as the BIM talks about apportioning on time (see http://www.hmrc.gov.uk/manuals/bimmanual/bim47820.htm).

    The second one I think they have more legs on as clearly it is not wholly or exclusively at a given time but I think rightly allowable to some extent.
    Regards,

    Burg
  • deanshepherd
    deanshepherd Registered Posts: 1,809
    My argument against the second was that dividing by the number of rooms was merely a tool for approximating floor area. Therefore, the floor area within that room upon which business items were stored was exclusively used for business and the floor area upon which personal items were stored was exclusively personal use. I told him not to consider it 'a room' but merely a 'floor area' within the house as a whole.

    Of course I had to be careful with using the word 'exclusively' all the time especially after his comment about the CGT.
  • ExcelAnt
    ExcelAnt Registered Posts: 80 ? ? ?
    Hiya,

    Hopefuly you guys can answer. My stepdad is looking at doing some contracting and I said to claim some of our house costs (as above) He mentioned he'd done this in the past but you need all soerts of liability cover/registered as a place of business etc. If this is true then it makes the point of claiming expenses useless.

    I know this is vague but can anyone clarify for me please as I expect those costs only If he were to have employees.

    Thanks,
    Chris
  • burg
    burg Moderator, FMAAT, AAT Licensed Accountant Posts: 1,441
    It is quite simple in the respect that he can either claim at the flat Rate of £4 per week (12/13 onwards) or calculate the costs relating to the space used as per the hmrc link I posted above if they are likely to be more.
    Regards,

    Burg
  • esimps
    esimps Registered Posts: 15 Dedicated contributor ? ? ?
    You can find some examples of Home Office Expenses on the HMRC website here: http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm
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