Working from home - Claiming mortgage interest

SussexAccountancy

Hi

I wonder if anyone can help as I am getting conflicting advice from different sources - my current understanding is that if a sole trader claims for expenses working from home (utility bills, council tax etc) then the room they work in has to be of sole business use. You cannot claim if your room is part business/part (say) childrens playroom.

You can also claim mortgage expenses - interest only, not capital repayments - but it has also been mentioned that you need to be careful with this as when you come to sell the house, you may incur CGT on part of the house which you have claimed business expenses on, as this is of "sole use" and you are claiming mortgage expenses. All fine so far.

However, I've also read one source which says the "golden rule" is as follows - if you claim mortgage costs, then make sure your "office" is not of sole use - if it has another (minor) use then you don't have to pay CGT.

But surely, going back to the first premise, if your room is not for sole business use, you can't claim any expenses at all - unless the "sole use" rule is incorrect.

Whew! I hope that makes sense to someone, as I seem to be going round in circles, and would like to get this sorted out to advise a client. If anybody knows of some good further reading that would be great,


Thanks in advance for any help offered,

reader

SussexAccountancy wrote: »

Hi

I wonder if anyone can help as I am getting conflicting advice from different sources - my current understanding is that if a sole trader claims for expenses working from home (utility bills, council tax etc) then the room they work in has to be of sole business use. You cannot claim if your room is part business/part (say) childrens playroom.

You can also claim mortgage expenses - interest only, not capital repayments - but it has also been mentioned that you need to be careful with this as when you come to sell the house, you may incur CGT on part of the house which you have claimed business expenses on, as this is of "sole use" and you are claiming mortgage expenses. All fine so far.

However, I've also read one source which says the "golden rule" is as follows - if you claim mortgage costs, then make sure your "office" is not of sole use - if it has another (minor) use then you don't have to pay CGT.

But surely, going back to the first premise, if your room is not for sole business use, you can't claim any expenses at all - unless the "sole use" rule is incorrect.

Whew! I hope that makes sense to someone, as I seem to be going round in circles, and would like to get this sorted out to advise a client. If anybody knows of some good further reading that would be great,


Thanks in advance for any help offered,

http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

See example 4.