The amount that you can set off against your business is the difference between what you would have been paying anyway and expenditure specific to the business.
Many home based businesses simply use the £4 per week but you can argue additional expense if such can be proven so additional costs of gas or electricity.
Do not confuse the company compensating you for use of your premises with the company paying the mortgage.
You cannot put things like mortgage, council tax, water rates etc. for your home off against your business as those are costs that would have been incurred regardless as to you running a business.
-- Edited by Shamus on Wednesday 27th of June 2012 10:12:36 PM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
But surely that means that if part of your premises are regarded as business premises then you are getting into a situation where you are going to end up paying capital gains on your main residence if/when you come to sell it.
I can see the intention behind the relief and why I'm confused. My understanding of this was that it was intended for a totally seperate dedicated part of a main residence such as an annex built as an office. The intention does not to me seem to be a general relief for mortgage interest that would have been paid anyway.
I think that this needs to be run past a CTA to understand all of the legal and tax implications including of course whether one's mortgage company would accept you doing this.
I'm backing out of this debate as I don't know enough about this area for any advice that I give to not be dangerous.
I really do think that the best approach here is to speak with a CTA to get the full picture.
kind regards,
Shaun.
p.s. sorry, we crossed in the post Ghislane.
-- Edited by Shamus on Wednesday 27th of June 2012 10:40:21 PM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The original question was that the husband uses a percentage of their home for a percentage of the time. I'm not sure how you see this as different from the examples offered in BIM47825. Example 4 for instance, seems close to the OP.
I don't think you took part in that one, don't worry.
but isn't the OP asking about compensating for using their home? HMRC then goes to the extreme of giving examples of how to calculate it (lets remember the £4 is for employees, nothing specifically says it apply to self employed that I have read) so surely it is fair to claim it.
I don't think anyone is suggesting that it's paying the mortgage.
I think we're agreeing to disagree on this one Shaun. These are the threads I enjoy.
Kris
-- Edited by kjmcculloch83 on Wednesday 27th of June 2012 11:35:32 PM
do you have a link to any further information on this as I would have said that it was not allowable.
I appreciate that the business compensates for use of the home in a little like mileage rates compensating for use of your car but the idea of the business actually paying mortgage interest that you would have owed anyway seems totally alien to me.
I appreciate that I am very far from knowing everything and am quite happy to be corrected if I've missed something but this doesn't sound right at all to me.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Yes, you can claim part of the mortgage interest and bills etc. I have clients who convert their Garages into work premises and are able to claim all the costs involved for the conversation and a percentage of the interest charged etc. based on a percentage of space used for business purposes. If they sell the property with the conversation then they would have a capital gains tax bill, but I tell them that they have to convert it back to a garage (claiming the costs of converting it back as repairs) and then as long as it is sold as a garage not work premises, there is no Captial Gains Tax due. Also they must not get it rated as a business too (which is not normally a problem) as this would also produce a potential Captial Gains Tax Bill.
My understanding is that as long as you don't use a room exclusively for business then there are no capital gains to take into account. Even if there was it would only be on the percentage used for business. The question of capital gains tax was discussed at length here: http://www.book-keepers.org.uk/t38915104/use-of-home-as-office-quick-question/
Have a look at http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm
It clearly says you can claim such things as mortgage interest, council tax, insurance etc.
I can see where your coming from but my understanding of BIM47825 is slightly different in that it seems to me to be proportional compensation for the owner forfeiting part of their home rather than a payment of the interest per se.
To me that makes more sense and is really just overriding the £4 per week with justifiable figures which is something that I'm quite happy with as I've advised clients on that basis before where they are legitimately using a proportion of their house for business.
Just off to have a read of the capital gains discussion that you posted a link to (oh please don't let me have been the main poster on that one! lol).
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Good to see you on the site. I notice you've not been around for a couple of weeks. Hope that you are ok.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Interesting read and some excellent and very relevant links in there Kris,
thankfully my name wasn't all over that one as it was whilst I was off playing at being a banker in Edinburgh at the time which is why I missed that one.
Seriously miss Robh's contributions to the site even if his "There or there abouts" approach is totally alien to me.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Just re read example 4 and I still think that my reading stands in that everything is about compensating for use of rather than paying the expesnses directly which as I say fits with my understanding of £4 per week or more is one can legitimately justify it.
To think of it as paying the mortgage or council tax rather than proportional compensation based on the costs of things such as mortgage and council tax though would wander off into more complex territory.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Because all but one of my stable are incorporated I always tend to think in employee terms, directors of course being employees of their company.
Your right. We seem to be saying the same thing in two different ways. Hope Ghislane keeps up with this in the morning!
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks for asking. I've been "drowning" with work since about October 2011, and have less and less time to spend on the forums.
So recently I've given in, and am in the process of expanding as I have had to turn away a lot of work which I wish I hadn't. Hopefully this will give me back some of the time I have lost - although don't get me wrong I am not complaining.
-- Edited by YLB-HO on Thursday 28th of June 2012 12:37:03 PM
My first "major" post in theme......... so hope i get it right!
My view is:
Count the number of rooms in your residence excluding kitchens and bathrooms, lets say 6 rooms one of which is used for the business so we have 1/6th
If total bills for gas, electricty, insurance, mortgage interest, council tax and water - Sorry Elaine but I think water is a legimate claim as if you had an "external" office you would pay water rates etc to have H2O for your tea and coffee, toilet facilities etc - equate to £3000.00
so, so far we have a claim of £500.00
If you use the room 5 days a week for 8 hours that equates to 40/168
so now we have a claim of £119.04 for your home being shared as a business and residential.
I do wonder however if one could not claim for 100% of the time for the room(s). If you rented an office away from your home you pay for the privilage 24/7, 365 and that's a legitimate expense! Would risk running foul of CGT i would guess
Just on the capital gains part though, and this is just my thinking I'm happy to be proven wrong, but if we take your example of 1/6th of the house being used for business. Surely that means that the value of the house would need to rise by over £63,500 before CGT would be due.
I agree with Kris as to the teatment of Use of Home, when it exceeds the £4/week rate
BIM47825 specifically allows a reasonable estimate for use of home "without detailed enquiry", for a self employed person, and would be happy to use £4, as HMRC use almost the same wording when it comes to employed use of home expenses and their £4 threshold.
From my own point I use floor area fraction and hours occupied to calculate my own "expenses". Similar to Lewis's example, except in that example it might be more benificial to use the £4/ week, as even at 40 weeks use, more is allowable
