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Anyone got an idea how much HMRC allow you to set against income tax for using a room in your home as an office? I seem to remember claiming £2 a week back in the nineties but don't know what a realistic figure would be now.
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Don't forget the free tea, coffee and biscuits which must be available to all staff.
Trivial I know, but I used to claim for a few jars of coffee etc. each year.
Last edited by: Dulwich Estate on Thu 5 May 11 at 17:51
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The answer is "whatever it actually costs you". HMRC state in their manuals, however, that it is not their policy to investigate when that sum is small, say £2 per week.
www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm
If anybody tries to tell you that you are "entitled" to claim £2 per week, or £3 per week, or £250 or anything else, they are wrong. However by convention £2 appears to be acceptable.
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I tie one room up for about five hours a week (at least). I was thinking £3 should not raise too many eyebrows.
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Well I have one room, exclusively used as an office and my accountant claims £250 a year. I trust her judgement, she knows her apples from pears.
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You shouldn't use one room exclusively as an office; it could give rise to Capital Gains Tax complications when you sell the house, as it hasn't been exclusively your principal private residence.
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CGT will not be an issue. This relies on a Land Tribunal case involving a member of HMRC's own staff who was working from home. Local council wanted to impose business rates, but lands tribunal decided that use as an office is ancillary to the main purpose of the house, and therefore can be discounted.
In 20 years working in tax, I have never seen a CG charge in this circumstance. Stu's £250 is in the right ballpark, imo, though for the last year or so I have usually claimed £300 to allow for the soaring costs of utilities etc.
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Be careful here, if the local authority finds out you are using a room exclusively for business you may be liable to pay business rates on your premises. I cannot remember the exact details but you're allowed to use a room for business but the room still must provide a residential purpose, otherwise the council could charge you.
This is what I remember on a course many years ago, so things may have changed since then.
I personally don't claim utilities for business use but when I start to pay rent on my sisters old room if she moves out then I will be doing as that will become my workshop.
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Its rather unlikely they will find that out though Rattle, all you need do is stick some clothes or make it multi-use in some other way anyway, its not rocket science to remove the exclusivity.
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Indeed, its pretty much what we were told on the course, stick a wardrobe or something in there, that way it will be very hard for the authority to make you pay business rates on the room.
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You lose your exemption from Capital Gains Tax when you sell the house on the proportion used as an office. But only if you have exclusively designated a particular room or area. If you keep using the whole house for domestic purposes, and only incidentally use a room occasionally as an office, it still counts for full exemption.
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Grief we have got ourselves confused.
Business Rates
There is no risk of business rates being imposed on a room used in a house, owing to the Lands Tribunal case Alastair mentions (Tully v Jorgensen [2003] RA 233), unless the business at the premises is advertised and clients visit etc etc.
CGT
I am intrigued that Alastair has extrapolated Tully to the CGT position. Are you absolutely sure?
BTW, OP, are you self employed or employed?
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Middle brother has a home office.
He was advised not to make the room office only for tax reasons - not sure what they were.
The upstairs room he uses is a reasonable size and his answer is to leave a made-up bed and bedside table in there.
Probably overkill.
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>>Probably overkill.
A sofabed is the usual recommendation. It means that the room is not used wholly and exclusively for business purposes.
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>> BTW, OP, are you self employed or employed?
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Self employed.
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Self employed: In which case the above assumptions are correct.
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I work from home most of the time now and on the advice of my bookkeeper (ex inland revenue) I have worked out how much electricity the hardware uses, added in heat, light and wear and tear and proposed to the Revenue that I charge £160 per quarter for my needs and they have accepted this without issue.
I was advised not to try it on and don't be greedy. There will be no other tax implications as I am just claiming the expenses of working from home and there is no need for a sofa bed either. If they ever need me to justify the amount I can so there is no issue.
I have been working from home now for 10 years, there are no employees visiting, no clients calling and I also have an office in a serviced environment where the post and visitors are directed.
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This week I received a booklet on starting up a company from a company which appears well informed and is states that "the easiest method to claim for home office costs is to claim the flat allowance of £156 per annum, no receipts are required and this is allowed by HMRC if you use part of your house as an office".
So I googled for it, and it is confirmed in this HMRC document www.hmrc.gov.uk/guidance/480.pdf
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Tax Relief For Using Room As Office - Perky Penguin
