couple of times I have come across situations when home office expenses were claimed at the rate of 20% of the bills - rent, water, electricity, council tax. These companies are hgv drivers (limited companies). I thought that it would be purely flat rate of £4 per week, but I have heard that lots of bookkeepers do this 20% rate. When I told those directors that this was wrong they didn't agree.
Now you 'can' claim 20% if let us say there are five rooms, and one is used as a office.
Now, as far as I know the £4 is the safest way to go about this.
Anything above and beyond is liable to be questioned, and of course you will need to prove your case. If you're a Lorry Driver I feel that it will be hard to prove that you need a room and everything included to perform your duties. But hell, it is not for me to justify someone else's actions :)
If you do genuinely use a room in your home for business, there are, if your home is owned / mortgaged potential CGT consequences if you decide to sell. (Using the method other than the flat rate)
So let's say you are genuine - you're a Director and you wish to go for the full claim - The company could rent a room in your home, you'd need a rental agreement in place and you'd fill in the boxes on your SE form, the Company would get relief from CT.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
In a previous working life when I was managing partner of a business I used to claim the percentage. My accountant at the time used to ask for details of how many rooms in my house etc. However I had one room (a converted garage) that was purely an office. It was totally kitted out as such with a separate business telephone line and everything.
I would have thought a lorry driver would have minimal paperwork to do but who am I to say?
Anything above and beyond is liable to be questioned, and of course you will need to prove your case. If you're a Lorry Driver I feel that it will be hard to prove that you need a room and everything included to perform your duties. But hell, it is not for me to justify someone else's actions :)
If you do genuinely use a room in your home for business, there are, if your home is owned / mortgaged potential CGT consequences if you decide to sell. (Using the method other than the flat rate)
To expand on what Johnny has said
The £4 a week rate is actually for employees working from home, and is tax free. However, there is no reason why a similar amount can't be calimed by a Company for use of home
The percentage rule can be claimed by a sole trader or a Ltd Co for home use and is not a set percentage, it is the number of rooms per house, not including kitchens or bathrooms. For 5 rooms, it would be 20% BUT unless the room was used exclusively as an office, you would further divide that by the number of hours a day spent at home doing paperwork. So lets say our lorry driver works 1 hour a day (generous) it would be 20%/24 or 0.83% of the claimable bills. For a bookkeeper, it could be 12 hours a day, so 10%. It's advisable that the room is dual purpose, to avoid potential CGT if the room was exclusively set aside as an office.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Not sure how HMRC would view this for a one man owner managed Ltd, but - if said client had within their contract the need to work from home say 2 days a week that could be another way to claim. But then that could bring into play minimum wage issues. Just a thought.
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
thank you for your replies, I agree - £4 per week should be the expenses here. Ellie
Is that really for you to say?
Simplified expenses method was created for the self employed, rather than limiteds (see HMRC) Its his choice, but you should guide him away from the 20% rule for the exact reason John (Leger) has stated in that CGT will apply when he sells his home, plus the fact he is a lorry driver doesnt justify 20% for 100% if the time. So it would be better to have duality of purpose for the room and then base it on a % of the time spent in a % of the room - that way no CGT.Tax mitigation.
-- Edited by Cheshire on Sunday 5th of February 2017 03:43:59 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
this is a rented accommodation, so no selling here. How would you then calculate this expenses based on the fact that this is a lorry driver (not much of an office work really) and it is a 3 bed house?Thank you
One is to pay £208 a year as tax free benefit on his salary but this is primarily for employees working from home, and could be subject to investigation. I don't really think a couple of hours a week doing paperwork really qualifies, do you?
One is for the limited company to pay the lorry driver either the actual calculation or a rental for the office. Work out the total claimable expenses for the year and divide by the number of rooms. and divide further by hours a day worked in office. If the entire room isnt being used (eg desk and computer in the corner, then you should also divide by floorspace of room used. Bear in mind that any excess paid above the calculation will be subject to self assessment income.
Sames rules apply re CGT, only it will be the landlord (do they know?) who cops it
The other is to simply ignore, is it really worth claiming for?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
One is to pay £208 a year as tax free benefit on his salary but this is primarily for employees working from home, and could be subject to investigation. I don't really think a couple of hours a week doing paperwork really qualifies, do you?
One is for the limited company to pay the lorry driver either the actual calculation or a rental for the office. Work out the total claimable expenses for the year and divide by the number of rooms. and divide further by hours a day worked in office. If the entire room isnt being used (eg desk and computer in the corner, then you should also divide by floorspace of room used. Bear in mind that any excess paid above the calculation will be subject to self assessment income.
Sames rules apply re CGT, only it will be the landlord (do they know?) who cops it
The other is to simply ignore, is it really worth claiming for?
Ellie - He needs to be careful that he is able to have a home office as part of his tenancy agreement. Worth doing the calc John mentions (he also gave an example in his first response I recall?)
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Thank you for your responses. I was very worried when I heard that previous bookkeepers allowed them to claim whooping 20% of the bills without considering anything (number of rooms, number of hours etc). No they are surprised that I do not want to do the same.....Thank you for the clarification in this subject.
