Use of Home - Simplified Expenses - The Book-keepers Forum (UK)

morgwick · Senior Member

Use of Home - Simplified Expenses

MarkS · Expert

I was at a course recently and the tutor said they had put the question to HMRC, what was the rate if less than 25 hours per month, they said they were still waiting for a response. I think there has been a flaw in HMRC's guidance.

You can still claim the £4 per week as a minimum.

Mark

morgwick · Senior Member

Thanks Mark, does seem to be a bit sketchy on their site.

I have a client that uses the home for about 5 hours a week, so if I was to claim the £4 a week it would work out more than the 25+ hours a month at £10!

-- Edited by morgwick on Saturday 22nd of February 2014 10:08:00 PM

Angie63 · Member

This was interesting to read as i looked in to this as i have a client who uses home for only a few hours

HMRC have a page that shows some example cases and one was listed as they only used home to write up own records etc and £104 (£2) a week was put through

I have followed this basis for my client (as it as an HMRC) exmaple - should i be claiming £4 a week ??

But then like Gills client that would work out at more than the £10 per month for 25 hours plus

Thanks

Angie

Shamus · Forum Moderator & Expert

Morning people,

I replied to this last night but deleted my answer as I wanted to sleep on it first.

I feel that my understanding of this is at odds with other peoples and I would be greatful if anyone could piont me at an HMRC page that shows my understanding to be wrong.

The following relates only to the discussion in relation to use of home.

- Simplified expenses is for sole traders and partnerships only. It is not available to directors or employee's.

- Simplified expenses completely replaces the £4 per week for the self employed and partnerships.

- Self employed and partnerships now only have two options. Either simplified expenses or time apportioned actual expenses.

- If the person works less than 25 hours per month from home then simplified expenses for use of home are not available and the tax payer can only use the time apportioned use of the relevant percentage of the home (or get nothing).

To me the most worrying thing about simplified expenses is that they include telephone (and broadband) charges where the £4 per week always emphasised that it was compensation for use of home inclusive of heat and light and all costs above that incurred wholly and necessarily for the purpose of the business were chargable.

For my clients this means that all limited companies will remain on the £4 per week but the self employed will need to move to percentage of home and actual costs incurred as telephone bills incurred wholly and exclusively even for the smallest of my clients is £480 per year.

Doesn't seem to be much of a simplification to me!

Just my take on matters and as I say I would be very happy for someone to point me at an HMRC page that shows that I am wrong.

kind regards,

Shaun.

Angie63 · Member

Hi Shaun

This is the HMRC example i have been following for my client

My client uses part of their spare room for a few hours a week to do quotes, make and return phone calls etc

I put through £2 a week based on the below

Should i be claiming £4 a week??? can you direct me to where this is said as when i began researching this for this client i never once saw anything that said £4... all i could find was if over the HMRC agreed number of hours which obviously didnt apply and then this re less than the HMRC agreed hours

Ive done £2 on the basis that if the client ever had an inspection and the issue was raised i could usethis example to back up why i had put £2 a week through

Am now getting slightly concerned that i havent been claiming enough for the client???? If i havent can i backdate for them

The £2 i put hrough i treat as covering everything re home use - ie electric, mortgage, council tax, home phone, home broadband - dont claim anthing else for the client separately re home use

BIM47825 - Specific deductions: use of home: examples

If there is only minor use, for example writing up the trade records at home, you may accept a reasonable estimate without detailed enquiry.

The following examples are a guide only and intended to demonstrate the principles to be applied. The examples are not intended to be prescriptive; each case will be dependent on the facts.

Example 1

Angela writes up her trade records at home. She uses a room solely for trade use for a short period each week. She estimates that £104 covers the cost of the proportion of the establishment costs, plus the electricity for heating and lighting.

Although the claim for £104 is obviously an estimate of £2 per week, the claim is small and reflects the facts of the case. It is a reasonable estimate of the expense incurred. No enquiries are necessary.

Shamus · Forum Moderator & Expert

Hi Angie,

As I say, its all change this year and going fowards its going to depend on whether your client is incorporated or self employed.

From my understanding the current guidance becomes for incorporated entities only.

For the self employed the flat rate disappears for entities using their home for less than 25 hours a month and for those over you enter into the tiered system (andf lose the seperation of telephone costs if they go down that route).

The above is only my interpretation and I hope that someone will point me at an HMRC page that shows me to be wrong in the way that I am reading it.

kind regards,

Shaun.

Angie63 · Member

Hi

I am concerned now that i have only been claiming £2 and not £4

Have you been putting through £4 for self employed clients?

Shamus · Forum Moderator & Expert

Where it can be justified yes.

When I visit a clients home I look at it the same as a tax inspector would.

Specifically is there a dedicated work area, dedicated phone, dedicated furniture, start up the PC and make sure that it's not a front screen full of the latest games. Sit them down and work out how long they spend working from their home office per week. Basically putting myself in a position that I would be able to argue that it is legitimate expenditure.

If I had a client working only a couple of hours a week from home I would put through actual expenses, not a set use of home but thats my personal view of what would appear fair and reasonable to an inspector.

For your clients the £2 per week may have been a fair, justifiable amount so nothing to worry about.... Plus of course it only went from £3 to £4 in 2012.

kind regards,

Shaun.

Angie63 · Member

im learning something here

There is a dedicated work area yes (i have seen it) and it just has work .... that i know as i have sheer frustration when they are frumbling through all their untidy pile of quotes etc to find what i need!!! and i see quote after quote being moved before what i need finally appears - should be thankful that at least it appears i guess!!

There is dedicated furniture and the computer is just business - has a separate one for home use

The phone is home and work likewise the broadband

They dont spend more than about 2-3 hours a week

How would i show it as actual expenses? i show it as a line "Use of home allowance" in my records

and where is all this info everyone but me knows

about £3 and £4 - i searched high and low when i researched this and all i got re less than 25 hours use was the example i attached earlier re £2

Shaun this is the same client as in my mileage post !!!! am abit concerned that in this case i havent been claiming enough??

Also i dont get how that works £4 a week if under 25 hours but £10 a month if 25 plus????????

Or am i being stupid here???

Shamus · Forum Moderator & Expert

Carrots and apples on the 25 hours and £4 Angie.

The 25 hours rule is the new simplified system (For self employed and partnerships only).

The £4 per week is the old system (which directors and employees will still get).

There are various HMRC pages showing the allowances for each year. Here's a good example of one :

www.hmrc.gov.uk/incometax/relief-household.htm

I've seen another that has that as a matrix but can't remember where at the moment.

You may find it beneficial to get Taxation by Melville every year (about £40 from Amazon). Current version is FA13, see here :

www.amazon.co.uk/gp/product/0273789260/ref=ox_sc_sfl_image_5

Generally thats my Christmas week reading and then a reference for the rest of the year. Much cheaper and more accessible than many of the Tolleys texts and less complicated that the ACCA paper P6 study text (which weighs in at 6cm of A4!).

HTH,

kind regards,

Shaun.

Angie63 · Member

thanks for that - think we will be reading the same over xmas

sorry to be a pain but re the HMRC page link - it says for monthly paid employees - is that for employees working from home only or does it apply to self employed also

Shamus · Forum Moderator & Expert

Hi Angie,

Its probably why I cannot find that other page with the matrix on it as HMRC seem to be going through all of their site updating the links to the simplified expenses effectively obliterating all prior evidence.

During 2012-13 the same rules applied to the self employed but self employed / partnerships have now been taken in a different direction to employee's / directors.

morgwick · Senior Member

Hi All,

Yes the first link that Shaun has given for "relief-household" is the one I found for the allowances back to 2007, but these are for payments for up to £x, so Angie if the £2 was sufficient then there would be no problems. This page to me is misleading because the old rates mentioned were available to all before the 2013/2014 tax year and this is where I got confused; seeing these old rates I assumed I was on the general self employed pages and as its states "From 2012-13 onwards" I thought it could be used for 2013/2014. However I've noticed that this document is now filed under "tax allowances and reliefs - employees or directors". So the current weekly rate of £4 is just for employees and directors (how I'm interpreting it). You cannot use if for those on less than 25 hours as otherwise it doesn't add up and would be unfair.

This page www.gov.uk/simpler-income-tax-simplified-expenses is regarding the simplified expenses for the year 2013/2014 which now applies to the self employed/partnerships but is optional. If choose not to use it, or they work less than 25 hours then you can use apportionment method.

I haven't found anything at the moment to say that you can use the £x a week method for self employed who work less than 25 hours at home, so I think Shaun is right in that we have to apply the apportionment method.

To me it doesn't help simplify matters for those who work from home less than 25 hours. Its going to take me longer to work out the use of home for them.

Shamus · Forum Moderator & Expert

I think that the way that HMRC have recycled and subtly changed a lot of web pages will confuse a lot of people Gill especially those like ourselves that read them under the old regime.

To my mind the new variance between employed/directors and the self employed/partnerships has not been properly conveyed and will cause a few issues during inspections if such get picked up.

EPF_Solutions · Senior Member

I'm really looking forward to getting into this after my 10 year break - not!!!!!! I'll be self-employed doing accounts work, and I'm trying to start a Community Interest Company of which I'll be a director, and I'll be working at the same desk and using the same equipment for both. And I use it for personal use too! At least I'll need to get to understand it well enough to explain to my clients. I hope!