get around paying tax on rent income

clutton_2

Ian W ""about CGT may well cost you more than you save in income tax"" - could you expand on this please, i have not heard of CGT liability on a PPR.

nelly_2

I remember my accountant saying something about if you claim tax against a room in your house then they can claim it back when you sell it for a profit, something along them lines anyway.

And in unrelated news my acountant is the father of Abi in that program with Andrew loyd webber in saturday night about maria in the sound of music.

musey

clutton wrote:

Ian W ""about CGT may well cost you more than you save in income tax"" - could you expand on this please, i have not heard of CGT liability on a PPR.

I can't remember the exact details but my accountant did mention something similar to me. It was something to do with using 1 room exclusively to run your business from. Sorry I can't remember more details, just that we decided i didn't affect me.

Ian_W

Like nelly & musey, explained to moi in those terms by an accountant. But it is logical - you are claiming the expenses for use of one room in your house [1/6th on your example] is "Wholly & exclusively" for business, it has to be wholly & exclusively to qualify it as a business expense.

PPR isnt without it's conditions to benefit from full relief, one of which is:
no part of your home has been used exclusively for business
purposes during your period of ownership.
See https://www.hmrc.gov.uk/pdfs/2003_04/capital_gains/ir283.pdf

My accountants advice was to claim an amount that could be justified as a proportion of housing costs without tying it in to a room or % of the house. I'm no expert so there may be arguments against that advice but I think that to glibly tell the OP to claim a % of their housing costs as a home/office, no matter how much or how little work they do from home, isn't doing them any favours. Things like that may work until the IR draw your name out of the hat for an enquiry - if/when they do you need to be able to justify your tax return or potentially face a lot of mither and a hefty bill.

BTW nelly, thanks for that info - I'll watch Abi on Saturday with renewed interest!!

Mrs_Arkwright

I'm quite interested in these replies. I have spoken to the tax office today regarding how much you can claim for office use in your house. I explained that we use part of a room as an office, not a whole room, and was very clearly told that I can claim a third of my heating/lighting expenses, due to the number of rooms in the house. The chap said you count the rooms in your house, take off the kitchen and bathroom, which leaves me three rooms (two beds and a lounge) and because we use part of one of those rooms as the office, I can claim a third.

The reason I phoned them today was because I'd read this thread, and I wanted to be sure I was doing it right. This is the same advice we were given on how to claim when we started self employment 8 months ago, so we've been given the same advice by two different people.

Are they both wrong? The advice we've been given seems to differ a bit from what is posted here? Or am I totally confused and this discussion is nothing to do with what I'm thinking it is?:)

Ian_W

Mrs A,
Try this thread with plenty of links to others and off-site websites dealing with tax:
http://forums.moneysavingexpert.com/showthread.html?t=222763&highlight=Tax+claim+home

HMRC are probably right about what you can claim against income tax - however, the BIG question is - if you do, will it affect your PPR relief against CGT on your home?????

I don't claim to know for sure but, along with other posters, have had accountants suggest to me that it might.

mossrax

clutton wrote:

the inland revenue are hardly going to come and inspect every house to see if you have a fully professional office instead of a spare bedroom !! but you are using "home resoureces" for the business, so everything that i have outlined above can be claimed. IR look for reasonable expenses. the type of expenses clearly depends on the business. i do a lot of mileage, so i keep a mileage log and claiim that, as it is more to my advantage, other business which do not drive so much keep repair bills - get some advice. the IR run free self employed courses, even if you are thinking of going self employed.

I am quite happy to put the house in their name, only i`d need to put it in trust or something like that in case they turn into idiots.

mossrax

Thankyou for your advice, i`ve only just started doing it and someone told me it would be classed as and taxed as a second income which would be silly money, and for all the hassel of being a landlord would it be worth it