Simple Tax question (I hope)

Medihv

Hello all,

Thank you kindly in advance for any help you are able to offer.

My Girlfriend is looking at starting her own business working from home.

Whist researching the highly exciting self assessment tax system I note that she is able to claim back a small amount of costs for the house such as, heating, electric, phone bill, etc etc, all related to her business. As she will need to heat a room to allow her to work when it would usually be off during the day etc, etc.

But... All of the Bills are in my name. Will this cause problems, or do I need to change them over to her name? Also the mortgage is in my name.

Thanks again!

lindabea

What you can do, since the property and all bills are in your sole name, your girlfriend can pay you an agreed sum for 'renting' a room in your property to run her business. She can then offset this as expenditure in her accounts. However, I'm not an accountant - not sure if this would be allowed!! Perhaps someone more qualified can advise.

sheramber

you can claim a fixed amount under 'simplified ex;enses'

https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

[Deleted User]

lindabea wrote: »

What you can do, since the property and all bills are in your sole name, your girlfriend can pay you an agreed sum for 'renting' a room in your property to run her business. She can then offset this as expenditure in her accounts. However, I'm not an accountant - not sure if this would be allowed!! Perhaps someone more qualified can advise.

Hmmm - not really thought through. The op would be taxed on the rental income.

lindabea

[Deleted User] wrote:

Hmmm - not really thought through. The op would be taxed on the rental income.

Perhaps - but the OP is allowed upto £7500 of rental income tax free. However, this amount may be halved, as it's his girlfriend who would be renting out the room.

00ec25

lindabea wrote: »

Perhaps - but the OP is allowed upto £7500 of rental income tax free. NO - see below [STRIKE]However, this amount may be halved, as it's his girlfriend who would be renting out the room.[/STRIKE] complete rubbish in the context stated, that is not a reason for it to be halved

appreciate you were only trying to help, but as previously stated, without knowledge it's dangerous to make tax related comments....

the rent a room allowance £7,500 is for letting furnished accommodation ie a room someone lives in. It is expressly NOT for letting rooms for commercial purposes .... use as a home office is a commercial purpose.
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4002

there would also be the possibility that commercial use of a part of the property would mean the property owner is then exposed to being classed as a commercial premises, and so having to pay business rates on the part let, rather than council tax. Rates are much higher than CT....

having rates levied on a part of the property and / or accepting rent for commercial use would result in that part no longer being eligible for private residence relief and so expose the owner to Capital Gains Tax on that portion of the property when the house is sold

it may also impact his insurance.... and mortgage and ???

00ec25

Medihv wrote: »

Hello all,

Thank you kindly in advance for any help you are able to offer.

My Girlfriend is looking at starting her own business working from home.

Whist researching the highly exciting self assessment tax system I note that she is able to claim back a small amount of costs for the house such as, heating, electric, phone bill, etc etc, all related to her business. As she will need to heat a room to allow her to work when it would usually be off during the day etc, etc.

But... All of the Bills are in my name. Will this cause problems, or do I need to change them over to her name? Also the mortgage is in my name.

Thanks again!

as a sole trader (ie I assume she will not be operating a limited company) she can claim some costs for "use of home"

The costs incurred must be hers, so yes she needs to be the bill payer. (forget about you charging her rent for the reasons mentioned in the previous post above )

there are 2 ways to do it:

easy way: she claims the "no questions asked" £18 per calendar month allowance as a cost against her income when working out her taxable profit.

hard way: she undertakes a detailed calculation of costs per square meter of space used and be time apportioned. She will need to documents everything that backs up the costs and the calculation method. HMRC should ask questions...

read this:
https://support.sherwincurrid.com/index.php?/Knowledgebase/Article/View/151/16/Sole-Trader---Use-of-Home

Johnhowell

Also, check if having a business based in your house will affect the level of Council Tax and Water rates. When we moved into this house we had to confirm to both that no business would be present in the home.
So you may gain on one hand but loss on the other?
I do not fully understand these ramifications if any, just repeating what happened here.
Good luck