Directors working from home

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
I know that HMRC have brought out detailed guidance on what a sole trader can claim in respect of working from home, but what can be claimed for a company who's business is run from the director's home? Is it possible to claim anything without incurring a taxable BIK for the director?

Thanks
Jodie

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    We get around this by not charging for 'use of home' but instead charging a "Rent". The company would have to rent premises if it did not have the use of the directors' home. Be sure not to forget the note for 'transaction with directors' and the rental income must be reported on the self-assessment, here you can offset the rental income with some of the directors' mortgage interest.

    We also put in place a rental agreement between the company and the director.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Thanks - I think that for the amounts involved in this case and considering that the client in question has paid off his mortgage, it's probably not worth it, but something to remember for future.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    You could still charge 'use of home' but you do fall into P11D reporting. No additional tax on the directors' because they can claim the contra entry as an expense. Just have the administrative burden! Unless you can claim dispensation?

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Probably not worth doing, eh? :lol:

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Well this is it - had I been all organised I should have thought about this in may and done the P11D/organised a dispensation notice, but it seems like too much hassle now to save a few quid in tax!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    I have just queried the P11d issue with my boss and he says "In 15 years of practice I have never put business use of home on a P11d, there is no need to".
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    Jodie R wrote:
    Well this is it - had I been all organised I should have thought about this in may and done the P11D/organised a dispensation notice, but it seems like too much hassle now to save a few quid in tax!

    Exactly, it's never worth it - especially when you take account of our time it takes to sort it all out. Ends up costing the client at the end of the day.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    farmergiles wrote:
    I have just queried the P11d issue with my boss and he says "In 15 years of practice I have never put business use of home on a P11d, there is no need to".

    Surely if a company if settling a personal liability of an individual then that is reportable event?

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Jodie

    Another thing you could do, but not strictly correct is claim the 'use of home' forget the P11D issue and just disclose it on the directors' tax return. Either way there would be no loss of tax but at least it has been reported in one form or the other.

    Just thowing ideas at you. :)

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    And here I was thinking I was asking a simple question :lol:

    I've just phoned the chroner helpline to clarify and the lady i spoke to agreed with Dean - that if anything's going to be claimed then a rental agreement needs to be in place. I guess in practice you can usually get away with a lot more than that.

    I think I'm going to sleep on this one...
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Have to agree with the boss of FarmerGiles. I've worked in accountancy practice since 1991 and have never seen Use of Home as office on a P11d.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Usual practice in my experience has been to post any adjustment for 'use of home' via the directors loan account, as though the company has merely reimbursed the director for a proportion of the household costs, rather than officially 'renting' a room. Never seen it done any other way.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    paulb wrote:
    Usual practice in my experience has been to post any adjustment for 'use of home' via the directors loan account, as though the company has merely reimbursed the director for a proportion of the household costs, rather than officially 'renting' a room. Never seen it done any other way.

    You have to report reimbursed expenses. Box 1.23 of the P11D?

    The employee would them claim a S.336 deduction on his tax return.

    This is the idea of the dispensation. It's just a paper trail.

    I agree that in practice it is probably just forgotten about as it is just too tedious, but strictly speaking it should be reported.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    paulb wrote:
    Have to agree with the boss of FarmerGiles. I've worked in accountancy practice since 1991 and have never seen Use of Home as office on a P11d.

    Me neither.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Well I've found this on HMRC's website, which appears to confirm that no P11D reporting is necessary so long as you only claim £2 a week, or can support a larger claim.

    http://www.hmrc.gov.uk/employers/ebik/ebik2/household-expenses.htm

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Jodie - brilliant thing to have found!!

    Thanks

    Claudia

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    I thought the £2 per week exemption goes without saying? :roll:

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    two more messages Dean and you have hit the big thousand......
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Well that says that you can claim a larger amount, so long as it only reflects the additional expense incurred from working at home - I imagine that means that you can use the guidance on 'Use of Home as Office' to calculate a figure to claim, but then this would not need to be reported on the P11D.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    paulb wrote:
    two more messages Dean and you have hit the big thousand......

    Good lord, I hadn't noticed that! :shock:

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    come on Dean, one more and we can uncork the champagne!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    Jodie R wrote:
    Well that says that you can claim a larger amount, so long as it only reflects the additional expense incurred from working at home - I imagine that means that you can use the guidance on 'Use of Home as Office' to calculate a figure to claim, but then this would not need to be reported on the P11D.

    We just never bothered with the 'additional' fiddly calculation. Trying to agrue the additional with the Revenue is also pain.

    We've just try to play the white man, claim the additional and report it.

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home
    paulb wrote:
    come on Dean, one more and we can uncork the champagne!

    Woooohoooo!!! :lol:

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    congrats :lol:
    i think we all deserve a glass after that!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    wine.jpg

    A wine man myself. Cheerz! :lol:

    Regards

    Dean
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Directors working from home

    Surely as a couple of Dean's posts were off-topic they shouldn't be allowed to count?

    :lol:

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