Use of home as office quick question - The Book-keepers Forum (UK)

Amanda · Expert

Use of home as office quick question

kjmcculloch · Guru

Hi Amanda,

Why not just work out a percentage of your costs if you are using your home to work from a lot now. You can have a percentage of:

Heat and Light
Council Tax
Insurance
Mortgage interest or rent

Regarding CTG, it only really applies if you use a room exclusively for business, so dont. Keep a hover, or golf clubs or other personal items in your 'office'.

Hope this helps.

Kris

Amanda · Expert

Hi Chris,

I was going to do that in the first place last year but someone advised me not to do it as it could be subject to CGT later.
It is the spare bedroom but it is completely decked out as an office, although we do keep all of our personal finances/folders in here as well, as well as my hubby's laptop.

So wasn't sure what to do for this year seen as I am at home alot more now.

cheers,
A

ADAS · Guru

Hi Amanda

Hope you dont mind me asking a question but I've been thinking along the same lines, £3 a week doesn't seem anywhere near fair - does it?

I might be wrong here, so someone please correct me.

But for a CGT liability to be created wouldn't the profit on the sale of the spare room have to be more than £20,000 because Amanda and her husband are entitled to a £10k allowance each? Or am I talking nonesense biggrin

-- Edited by ADAS on Friday 22nd of October 2010 02:26:04 PM

kjmcculloch · Guru

You're right Tony.

If you buy a house for £100,000, use 20% of it for business purposes then sell it for £150,000

You get Private Residence Relief on 80% of it. So you have to pay CGT on £10,000. As you rightly say you get 10,100 personal allowance each year, so assuming you haven't used any of that you don't pay CGT on anything.

Or don't use the room exclusively for business and save some hassle.

Kris

ADAS · Guru

Thanks Kris,

So if I'm reading you correctly - you used the spare room 75% for business and 25% for everyday domestic use. You can reclaim 75% of the cost of running the room but not create a CGT liability in the future?

RobH · Expert

I actually think the £3 a week isn't totally unfair. In reality by being in the house an extra 8 hours a day, running the light, computer and an oil filled radiator would probably not cost any more. In any case the tax saving on doubling that amount would work out fairly negligible and isn't worth annoying our friends at hmrc about in my opinion.

Rob

kjmcculloch · Guru

That's right, as long as it's not exclusively for business there's no CGT to pay.

Kris

Amanda · Expert

Hi Rob,

So are you saying its not worth bothering about trying to claim more than £3 per week?

Kris - I see what you are saying about the CGT, it was just that accountant friend of mine told me not to do it, so I didn't do it last year, but was unsure what I should do for this year.

Cheers,
Amanda

RobH · Expert

Hi Amanda,

well it all depends on how much more you think you could claim for. If we assume you are a basic rate tax payer, then there will be 20% tax and 8% class 4. If you increased to say £5 per week (Which I think is reasonable personally) then you will claim £260 instead of £156, a difference of £104, which equates to a tax/NI saving of £29. Worth having but not worth spending too much time worrying about in my opinion. I would go for £5 per week (I think £8 is hard to justify) and should hmrc want their £29 back then they will need to ask for it!

Rob

kjmcculloch · Guru

I'm not sure what your accountant friend told you not to do. But I do agree with Rob.

I've just used this as inspiration to write a quick guide to be put on my website. Not live yet, small bits of editing to do, but have a sneak preview: http://www.kmbookkeeping.co.uk/homeguide.php

Kris

RobH · Expert

I like that Kris, I would point out that the savings you have indicated do not account for class 4 ni though.

Rob

kjmcculloch · Guru

I did notice that from your post, this is one of the things I'll add, but this is my policing night so it'll need to be tomorrow.

Cheers Rob,

Kris

PamelaG · Member

Hi Kris,

I like the guide very helpful, one small thing you have stated to count all the 'roms' in your house instead of rooms!

adi2402 · Senior Member

kjmcculloch wrote:

I'm not sure what your accountant friend told you not to do. But I do agree with Rob.

I've just used this as inspiration to write a quick guide to be put on my website. Not live yet, small bits of editing to do, but have a sneak preview: http://www.kmbookkeeping.co.uk/homeguide.php

Kris

I think the accountsnat was trying to ensure the house was still used as a "home" to enable full PPR relief to be claimed.

from HMRC "

Using your home for business purposes

You might work at home because you run your business from there. If you do, you can still get the full amount of the relief as long as you keep using all of your house as a home. For example, the room you use as an office may also be used as a guest bedroom.

But if any part of your home is used exclusively for business purposes, for example part of your home is used as a joiners workshop, you'll have to work out if there's any Capital Gains Tax to pay."

link:

http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#3

Amanda · Expert

Hi Everyone,

Thanks for all your replies, I think I will stick to £5 per week I don't think I will push it for anymore, like Rob says its not worth annoying HMRC!

Thanks everyone, its nice to hear what peoples oppinions are on this subject.

cheers
Amanda

kjmcculloch · Guru

Ah right, I though the accountant friend was suggesting not to claim for using the home as an office, which confused me.

kjmcculloch wrote:

Or don't use the room exclusively for business and save some hassle.

I think we're both saying the same thing then, that's what I was trying to get at too. As long as you use the room for something else as well as business you're ok.
Just as a wee aside, for last year I claimed £416, or about £8 per week, I have my refund from HMRC and no one has said anything about it yet, although I have the calculations if they do.
Kris

-- Edited by kjmcculloch on Sunday 24th of October 2010 09:13:13 PM

Amanda · Expert

Hi Kris,

Do you use the pare bedroom in your house? I do and I suppose if anyone was to stay I could put a blow up bed in there for a couple of nights if need be.

cheers
A

kjmcculloch · Guru

Last year I used a spare bedroom, but I found it difficult to concentrate. In the summer I bought a lodge for my garden and thats where I run my business from now.

When I was in my spare room, my partner did the ironing in there, thus it was not used exclusively for my business.

Even if I had used my spare room exclusively for my business, my house would need to double in value by the time I sell to cost me anything for CGT at the current rates.

Kris

Merlion ABS · Senior Member

In the past when I was in practice, we claimed up to a maximum of £6 a week for use of home as office. however we didnt always claim this for the full 52 weeks as we allowed for the xmas period and annual holidays!!

I would be tempted to only claim for actual weeks worked as if you took 2 weeks abroad, you dont really want to be claiming for those weeks if you see what I mean.

Jordan · Veteran Member

Hi Amanda et al,

I know this is a bit late on, but I have just been to a training course at my local HMRC office called Business Expenses & Capital Allowances. It lasted about 2 1/2 hrs and was free and was a very good update session for myself.

The 2 information forms for working from home to look at and download from the HMRC website are:
BIM47820 & BIM47825

Very informative. The £3 a week is for if you only use your home to do your buusiness paperwork, but you are entitled to a lot more. Look at the examples and work out what best reflects you, you may be a bit surprised, half the class where !

ta ra.

BackOfficeGroup · Guru

I think everyone should also think about insurance - I would not be surprised if your current home insurance provider states somewhere in the small print that your home is not to be used for business, likewise if you live in a flat (or anything leashold), the lease probably alsi states that!!

and as for the topic, I would also only claim £5 per week to cover any expense for use of the home as an office.

P

ADAS · Guru

Bim47825 makes interesting reading, particularly example 4.

I think the circumstances of a bookkeeper working largely from home are closer to that of an author than someone who writes their records up for an hour or so a week.

-- Edited by ADAS on Monday 15th of November 2010 04:08:21 PM