My client is a therapist and has a cabin in her back garden to carry out treatments, she would like to claim some of her council tax expense and electricity as an allowable expense for Self Assessment.
Please could some one suggest the best way to apportion the cost? This has been her first year and hasn't carried out that much work, I really want to make sure I get this spot on. Any suggestions, gratefully received.
there's two approaches that are generally acceptable.
applicable household bills (excluding mortgage) multiplied by the % of floorspace used by the business.
or
£4 per week
For small businesses the government have proposed dropping the first option but it's still there at the moment.
The % used would have to be genuine and credible for the business.
The added complication that we both have for a client is that the business is performed in the garden shed so whilst there may be reasoning behind a % of electricity what justification is there for the council tax?
We would need to look at each element included in the calcuation individually rejecting council tax and water rates which would have been the same regardless as to the existance of the business.
Mortgage doesn't come into the equations.
Phones get treated seperately
Business insurance would be seperate to household insurance.
Just really leaves Gas and Electricity (heat and light) making the £4 per week sound more appealing than the floorspace % method... Plus of course that methods likely to be around for longer.
All really down to the figures specific to the business in question.
Worth noting here is that you need to keep an eye on whether the business has the potential to make a profit (it does not need to be making one but it needs to have the potential to). If not then it is a hobby, not a business. And for hobbies nothing is allowable.
kind ergards,
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.
