Building work and businesses expenses

martindow

I run a small business from home and claim a small percentage of heating, lighting, phone, etc. as business expenses.

I'm about to have some building work done removing some internal walls, renovations and repairs. It is primarily a house but to some extent this work is planned to take business needs into account such as storage.

It is a very attractive prospect putting some of this as an expense in my accounts. I suspect the answer to be a resounding no but I wondered if anyone would like to comment on this.

paddyrg

Talk to an accountant and see what they think is reasonable. Some are bolder with what they will think are reasonable than others, but as it's always your neck on the line I wouldn't push it too far!

Aquamania

martindow wrote: »

I run a small business from home and claim a small percentage of heating, lighting, phone, etc. as business expenses.

I'm about to have some building work done removing some internal walls, renovations and repairs. It is primarily a house but to some extent this work is planned to take business needs into account such as storage.

It is a very attractive prospect putting some of this as an expense in my accounts. I suspect the answer to be a resounding no but I wondered if anyone would like to comment on this.

Have you informed your council?

Perhaps it will need planning approval? Change of use consent?
I bet they;d love to hit you with some business rates too.

Do you have a mortgage? If so, have you let them know?
What about insurance?

Or are you hoping to keep it all hush-hush?
If so, best not to let HMRC know either, eh?

:cool:

InsideInsurance

Heating, lighting, mortgage/ rent etc all starts getting into slightly dangerous territory (particularly the later) and given the £3 a month for running a laptop etc it generally isnt worth the risk of doing it, as others have said, in theory if you say you are claiming 10% of bills as business because you have 10 rooms and one is your office then you may find the council think that you need that room to have business permission and pay business rates.

Building work, rather than maintenance, would be a capital expense rather than revenue expense and so if you did decide to take the risk you need to ensure its correctly treated

Mistral001

Claiming too much for use of home, make you visible on the radar of all sorts of authorities as others have mentioned. Also, you could be charged Capital Gains Tax on the portion of your house which you are claiming is used for business should you sell the house at some time in the future.

martindow

Thanks for the replies. I didn't think it would be sensible to try to claim for this, but it was tempting as even a small percentage of the five figure cost would be a considerable sum. I tend to be cautious on these matters anyway so will resist the temptation.

I spoke to an accountant when setting things up who advised on the percentage and recommended that no room was exclusively for business use, but was shared private/ business use to avoid issues with planning or CGT if selling in the future.

trailingspouse

We run our business from a room in our house (there is also a sofa bed in there, where occasional guests are put up). Our accountant was OK with us putting the cost of refurbishment through as a business expense - plastering, carpet, blinds, paint, and some plumbing to provide an area for making tea/coffee. We're now replacing some of the furniture (two desks, bookcase, coffee table), and that too will go through the books.

TheTracker

Aquamania wrote: »

Have you informed your council?

Perhaps it will need planning approval? Change of use consent?
I bet they;d love to hit you with some business rates too.

Do you have a mortgage? If so, have you let them know?
What about insurance?

Or are you hoping to keep it all hush-hush?
If so, best not to let HMRC know either, eh?

(Text removed by MSE Forum Team)

All these concerns are likely unwarranted.

Use of Home as Office attracts business rates depending on the extent and frequency of use, as well as structural alterations to room. Use of Home is declared in submitted accounts each year as a line item so HMRC knows your expenditure here. Speak to your local council and VOA if you don't trust your accountants views.

Similarly your mortgage lender is primarily interested in works that would change the value of a home and thus their collateral. If you're not making structural changes, and business rates do not apply, then the lender shouldn't care. An example of interest would be if you were turning a room into a dentists clinic or showroom. Moving an internal wall? I doubt it.

Insurance and the small business owner are close friends. You should always ensure you have adequate insurance for the business and its liabilities including health and safety. If you change the value of your home or increase the contents value of your home then you need to reflect that on associated policies.

Any accountant can advise in all 3 cases.

With all business expenses I use the BS test. How would my friend, mother, neighbour, butcher, taxi driver, newspaper react if they knew I claimed X for Y? Most people I know claim anywhere from a couple of hundred to a couple of thousand pounds per year in expense (effectively "saving" them about 20% of that in tax) depending on how and why they use home as office.

To the OP, the "exclusive" test usually means more than 5 days of 7, and 52 weeks a year. Weekend knitting and Easter holiday visitor air bed can kill it.

I personally wouldn't claim on this work. I would consider a sensible annual expense for "maintenance and repairs" , documenting how you came to the figure, and allow it each year. But probably no more than one hundred in my case. The key part of your statement is part of the reason you are doing this is to take business needs into account. In which case you probably have a valid claim against those parts of the work, but it can be difficult to estimate. If while undergoing the repairs you need to work elsewhere and that incurs a cost then you should consider it as an expense. Perhaps you needed to check in to a hotel for a few days during the week.

Other company owners and their accountants work on the concept of renting a room to the business for a number of days per week. £10 a day seems reasonable, given if you didn't have the space available you'd have to rent elsewhere if it wasn't available. Eg I can't work in a cafe or lobby for security/privacy reasons. If I didn't use my home office Id have to rent a professional workspace a number of days per month. How many days a year and expense would be incurred in a Regus office otherwise? It all comes down the the BS test.

Mistral001

TheTracker wrote: »

With all business expenses I use the BS test. How would my friend, mother, neighbour, butcher, taxi driver, newspaper react if they knew I claimed X for Y? Most people I know claim anywhere from a couple of hundred to a couple of thousand pounds per year in expense (effectively "saving" them about 20% of that in tax) depending on how and why they use home as office.
.

What does "BS" of BS test stand for? I do not think is British Standard in this case - but I could wrong.

paddyrg

Long and short, you can claim whatever you like, BUT when HMRC want evidence to back it up, it'd better be strong

TheTracker

Mistral001 wrote: »

What does "BS" of BS test stand for? I do not think is British Standard in this case - but I could wrong.

Otherwise known as the cow patty test.