SA: Claiming electricity for full time self employment - home working

SlingShot

Hi guys,

I know I've left it very late to file for 2007/2008 - my first year of trading - but I've created a cash book style spreadsheet and have just about everything documented now (revenue expenses and capital expenditure).

The last claim I want to sort out is electricity costs for working at home.

Now, I started the business in May 2007 but this was when I was still doing a full time job in an office. I went 100% self employed in November 2007. I was therefore thinking it would be easier to claim electricity for home working from November 2007 - March 2008.

My only problem is knowing how to work this out. I was looking at the simple £2 per week but this seems very low.

I know you can claim a % of electricity bills based on number of rooms in your home and then working out the costs for a single room you use. My issue is that I use my open plan living room / kitchen / dining room for work - I have one wall which has a long desk on it with my computer equipment.

Anyone know what the formula is I can use. I was thinking I'd have to work out the electricity costs for Nov - Mar, then divide that between rooms to find out the cost per single room. Then I assume I would need to take the single room figure and aportion it based upon surface area used for business and surface area used for personal. I will also have to base this on number of hours worked over a 20 day working month.. I assume..
Very complicated.. Just wonder if it's worth it or if I should just go for the £2 a week option that the tax man will accept without enquiry.

I'd like to claim more though as I have 3 computers dedicated to the business which are all adding to my ever increasing bills.

Any help would be greatly appreciated.

fengirl_2

In your situation, there is really no formula you could use. HMRC will accept anything 'reasonable' as long as you can justify it. What about including the difference between your normal electricity bill before you were self employed and what it is now. I know prices have increased, but maybe you could compare the number of units used?

SlingShot

fengirl wrote: »

In your situation, there is really no formula you could use. HMRC will accept anything 'reasonable' as long as you can justify it. What about including the difference between your normal electricity bill before you were self employed and what it is now. I know prices have increased, but maybe you could compare the number of units used?

Hey there,
Thanks for the rapid response - much appreciated.

I did think my situation might be somewhat non-standard. It's just hard to know what they would accept as reasonable - especially as they could pick me up on this in the next 6 years. Not a bad idea to compare the difference in costs although I think I'd still have to aportion it which could be the hard part.

When I did the HMRC tax courses they gave me this formula:

1. Add annual bills together / no rooms in the house (excluding kitchen, toilet, halls ways bathroom etc) = A

2. Average number of hours worked at home / 168 = B

3. A x B = C

C is the allowed claim.

I could maybe use this but I'm still unsure how to handle my part business / part personal use of the living room / dining room.

All so complicated..

fengirl_2

Yes, the formula they have given you is generally accepted, but is not laid down in law and does not fit your circumstances (I blame Kirsty and Phil for all this open plan stuff). As I said before, HMRC will accept anything reasonable and I think a comparison of before and after fuel charges would be logical.

SlingShot

fengirl wrote: »

Yes, the formula they have given you is generally accepted, but is not laid down in law and does not fit your circumstances (I blame Kirsty and Phil for all this open plan stuff). As I said before, HMRC will accept anything reasonable and I think a comparison of before and after fuel charges would be logical.

Heh heh.. yeah, all this openplan nonsense does seem to have made things more complicated.

Couldn't I use the formula but then aportion the final figure to account for the room being used for business and personal?

fengirl_2

As I have said, you can use any formula as long as its reasonable and you can show how you have worked it out if challenged. At the end of the day the amount in terms of tax is tiny.

SlingShot

fengirl wrote: »

As I have said, you can use any formula as long as its reasonable and you can show how you have worked it out if challenged. At the end of the day the amount in terms of tax is tiny.

Yeah that's very true. I remember on my course they told us it's not a lot of relief your getting really.. Although if your entitled to it you might as well claim.
I must admit I'm thinking of not bothering if it's too much hassle to calculate, or just claiming the £2 / week.

I think I'll use the formula to work out the per room cost and then aportion it 50% business / 50% personal which seems about right. If that comes out more than £2 / week I'll use it.. Otherwise I'll just use the £2.. Something like that.