Self Assessment Newbie

Laika7

Hi there,

I'm just finishing up my 2010/2011 tax return and wanted to clarify a couple details. Any help / guidance is much appreciated.

I'm a freelance web developer that works from home in London. I travel to a client based in Reading about 1 - 3 times a month for meetings (same office every month).

The client reimburses the full amount of the travel, so am I allowed to claim these as expenses? Also does this qualify as a temporary workplace?

Many thanks in advance!

Pennywise

You declare the amount they pay you as income, and then you include the same amount as expenses, so they contra against eachother on your tax return, meaning no tax due nor any tax relief as the journey hasn't cost you anything and you've not profited from it.

The temporary/permanent workplace doesn't come into it.

BoGoF

What was the method of travel? If car, how was the reimbursement calculated?

Laika7

Yes I have declared the amount as income, just wasn't sure if I could claim back on expenses, thanks for the heads up Pennywise!

BoGof: 100% train journey's.

Laika7

I had moved to 3 different houses during the 2010/2011 tax year.

So I'm guessing I will need to calculate the costs of my home office for each individual month - as there are changes in rent, amount of rooms, council tax, etc.

I work from my bedroom, which is dedicated to my freelance work between the hours of 9am - 7pm, 5days a week (50hours p/w).

I'm looking to claim back my home allowance by usage.

For example lets say that the house paid the following for May 2010.

Council Tax: £100
Electricity+Gas: £50
Broadband: £30
Rent: £900
Total: £1080
3 Rooms (Excl. Kitchen + Bathroom)
Room expense: £1080 / 3 = £360

Hours for business: 50hrs x 4.33wks = 216.5hrs per month
Total hours in avg. month: (24 x 7) x 4.33wks = 818.37hrs
% Portion work expense: (216.5 / 818.37)x100 = 26.46%

Total Expense: £360 x 26.46% = £95.23

Is that calculation 'Reasonable' by HMRC standards or have I omitted something really obvious? _pale_

It's just that it is quite a bit higher than the £3p/w they offer without question. Especially when it's multiplied across the 12 months, minus holiday & time off.

Refrences:
hmrc.gov.uk/manuals/bimmanual/bim47820 .htm
hmrc.gov.uk/manuals/bimmanual/bim47825 .htm

Laika7

I also forgot to mention I lived with 2 other people at the time, but during work hours (9-5) I was the only person in the house.

As a side note, (probably over-complicating things massively now)
- The last 2 hours of my work day (5pm - 7pm) the other 2 members of the house arrive back from work, so should I split these 2 hours by 3, even though they do not use my room for anything. Or does the initial split by number of rooms take care of this?

Laika7

PS. I'm more than happy to pay the tax I owe, I just don't want to miss out claiming any expenses that I'm genuinely entitled to - so any advice would go a long way! Thanks again

Laika7

I think I found an answer on accountingweb from someone in a very similar position - can anyone see any possible issues with this?

accountingweb.co.uk/anyanswers/self-employed-apportion-home-office-costs#comment-464736

SteveOH : Let's start from the basic premise that a deduction is allowable provided that there are times when part of the home is used solely for business purposes. So it is irrelevant whether or not your client shares the flat with his wife or the England football team. If he is incurring the expenditure then he may be entitled to a deduction.

Wholly and exclusively does not, in this context, mean that part of the home must be permanently used for business purposes. What is does mean is that when part of the home is used for business purposes, then that is the sole use for that part of the time.

The exercise then becomes one of apportioning the total cost incurred. It could be on an area and time basis - in your client's case, maybe 20% of the total area of the flat for 25% of the time. It could be on a consumption basis - eg for utility bills. Whatever method, or combination of measures, you choose for apportionment they should be reasonable and they should be recorded and thereby open to scrutiny by HMRC.

The types of expense that might be apportioned include rent, mortgage interest, council tax, insurance, repairs, cleaning, light and heat, telephone, water rates.

But they seem to have veered off topic with business rates and acronyms so no full answer was ever posted.

- Still not able to post links :lipsrseal so please add the www. to the beginning.

Savvy_Sue

Laika7 wrote: »

I also forgot to mention I lived with 2 other people at the time, but during work hours (9-5) I was the only person in the house.

As a side note, (probably over-complicating things massively now)
- The last 2 hours of my work day (5pm - 7pm) the other 2 members of the house arrive back from work, so should I split these 2 hours by 3, even though they do not use my room for anything. Or does the initial split by number of rooms take care of this?

Personally I think you're massively over complicating things here. Also the link you posted seems to agree with me.

Laika7

Thanks Sue, yeah I found that page and a few other posts around MSE where most people agree apportioning costs is ok as long as it's done in a reasonable & consistent way.

I guess if I get challenged by HMRC I will just have to supply all the bills + explain my calculation, as per their examples.

Also as I do not earn anywhere near £70k p/a - Am I right in thinking I just have to fill out the single expenses field (not the detailed expenses section), is that correct?

Davesnave

Laika7 wrote: »

I guess if I get challenged by HMRC I will just have to supply all the bills + explain my calculation, as per their examples.

Also as I do not earn anywhere near £70k p/a - Am I right in thinking I just have to fill out the single expenses field (not the detailed expenses section), is that correct?

You are very unlikely to be challenged if the claim is reasonable. Just keep it simple. Keep any working out you do filed with a copy of this year's return.

Yes, under 70k turnover and with straightforward business affairs (just trading income and interest on any money in the business bank account) you only need to fill in the short version of the form.