Use of Home Tax Allowance - Can Somebody Please Clarify?

oompahloompah

HI everyone
I know HMRC will allow £3 per week for working from home; my question is - is this allowance per property or per person? My partner and I both work from home (same business), up til now we're just claiming one lot of allowances but I'm wondering if we could claim £3 each, as we both have separate jobs to do, plus of course the usual heating and lighting and so on that we wouldn't have if we were out.
Thanks

PlutoinCapricorn

Are you both employees paying tax under PAYE? If so, are you both required to work at home i.e. it is in your contract of employment that your main place of work is your home address?

oompahloompah

Sorry, I should have been much clearer. We are both self employed in the same business (a partnership), both working from home full time, and I know we can write off £3 a week for using electricity, gas etc at home - what I'm not sure about is whether this is per business/ property or per person?
thanks and sorry for the confusion.

PlutoinCapricorn

The £3 per week applies to employees only.

Self employed people have more scope: you can claim a proportion of running costs such as electricity, water, gas, council tax, mortgage interest, insurance, broadband etc. based on number of rooms excluding kitchen and bathroom.

I am not sure what happens when two sole traders share a premises: if there is only one business then it seems to me there should be only one set of deductions.

Rolo_Tomasi

Any deduction for use of home should reflect the extra cost of running your business from home. The £3 per week is for the employed, not self employed, but can be used if this reflects the facts of the individual circumstances.

Use of home should be calculated by the business, not the individual, and the Revenue gives some useful examples of how to do this here.

pchelpman

PlutoinCapricorn wrote: »

The £3 per week applies to employees only.

What?

I've never heard this.

Which legislation allows employees to claim £3 per week and what is the claim for exactly?

Rolo is correct in the previous post.

Remember that, strictly speaking, in a self employed business (and, indeed, in limited companies), claims are allowed for any expenses so long as they are "wholly and exclusively" incurred for the business and for no other personal benefit.

It is the business that incurs the expenses and it is the business that will claim them on the partnership Tax Return. The expenses claimed must be those incurred by the business irrespective of the number of persons involved.

PlutoinCapricorn

The £3 allowance is not only just for employees, it is also only for employees who are required to work from home i.e. it is in their contract of employment. It does not apply to those who have special permission to work from home. This allowance has been mentioned many times in this board, as have running costs for self employed people. HMRC give the £3 details here:

http://www.hmrc.gov.uk/MANUALS/eimanual/EIM01476.htm

pchelpman

I understand what you are referring to now.

I thought you were saying this applied to all employees.

So it doesn't apply to ALL employees across the board. Only those working under the specified arrangements indicated in the HMRC manual.

pchelpman

As the £3 per week referred to by PlutoinCapricorn relates to certain specified employees only, and as you are self employed, my own view is that you should try to maximise your legitimate claims. Maybe even above the £9 per week (but always be mindful of Capital Gains Tax pitfalls).

A while ago the Revenue gave some guidance on what they would accept. Some examples here >>

http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm


Hope this helps.

PlutoinCapricorn

Self employed people often count their rooms (not including kitchen and bathroom) and get a percentage, which they then apply to all running costs. For example, if you have 4 rooms and one is primarily an office, you can claim 24% of the total electricity, water, council tax, mortgage interest, insurance etc, for the year. But do keep records of bills, and be ready to justify the proportion. If you are out all day seeing clients, then you might use much less than someone who is online all day for their business. It is not possible to calculate everything exactly, you just need to come up with a reasonable figure.

pchelpman

Yes, that is an option but this is why I gave the heads up on CGT, the comment in brackets in my previous post.

The worst scenario is that you go for years claiming, say, 24% of your home is used for business purposes then, when you sell the home at (hopefully) a decent profit, it may be difficult to reply on the "principal, private residence" rule that usually exempts your home from CGT charges.

The Revenue could argue that the 24% you claim as business use cannot also be classified as "home" for CGT exemptions. In that situation you could end up paying CGT on the disposal of your home.

Anyway all I'm saying is that all angles need to be bourne in mind.