Offsetting rental cost employee

DenABac

Hello all,

I've been going through the HMRC guidelines for a few days, also I couldn't find anything that relates to this specific case in the form.

Just this weekend I found out that the HMRC used to allow for offsets of rental cost and council tax prior to 2006.

In my case additional rental fees are due since I have a whole and completely dedicated room as my office in my flat. Since my nearest office is approx. 550 miles I have to work from home around 90% of the time.

Now the room I mentioned is really only used for work. I usually go in at around 08.00 and leave by 18.00. While the room is a part of my flat, I'd say it's used wholly and excursively for work. Also, when I took out the lease I was specifically looking for a flat with an additional room that I could use as office.

The additional cost for this totals to roughly 480£ / month.

No I was wondering if it's possible to find out why HMRC changed their guidelines in 2006. Is there anyone with a little more inside? It would also be great to see any case law if someone had a link?

The IR manual I could find are the ones below.

HMRC: Other expenses: home: household expenses: expenses that are not deductible, Section 336 ITEPA 2003.

Best
D

01afraser4

The cost of rent is an amount you would need to pay regardless of whether you work from home or not and as such no part of it is paid wholly and exclusively for the purposes of your employment. That's why it is not an allowable expense.

00ec25

also bear in mind that if you persist in it being "wholly and exclusively" a dedicated office space you WILL lose PRR and expose yourself to CGT when you sell the flat

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64660

also you run the risk (admittedly small) of "the council" slapping national non domestic rates (NNDR) on you instead of council tax since part of your property is purely business use

Caz3121

If your employment contract states your location is your home, have you asked your employer to contribute to your costs?

DenABac

Hi all, thanks for you replies!

@01afraser4
Yes, I did read the manual and came across the same words. However I think it’s a little different with me since I specifically have a larger flat to accommodate a full furnished office. This includes a large desk, bookshelfs, visitors chairs, computer accessories.

I don’t get why for example gas is different there. Apparently this can be proportionally deduced while gas, especially the sanding charge is needed regardless.

@00ec25

Actually I would take this into account separately. Especially with the council I’d be happy to take this up.

I don’t owe the flat. Even if I didn’t prefer renting, I couldn’t afford it. West London prices....

@caz3121

That’s a tricky one. Since we, homeworkers can be anywhere, it’s literally up to preference. Most of my colleagues are somewhere in the countryside, where they have „reasonable“ transport links, but obviously their cost is nowhere near mine.

But my employer could justifiably argue that I don’t have to be in a high price location. It’s really just my preference that brings the cost to roughly 30-45% more.

I’d probably not approve additional funds for my staff in that situation either.

Best
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Pennywise

DenABac wrote: »

It’s really just my preference that brings the cost to roughly 30-45% more.

Which is why you don't get any extra tax relief for the costs you've "chosen" to incur due to preference rather than necessary.

For employees, the test is whether the expense is "wholly, exclusively and NECESSSARY" - you fail on the necessary part.

01afraser4

As Pennywise mentioned, your preference rather than necessity to work from home is what prevents it.

Example 3 - employee working at home by choice found at EIM32790 matches your situation quite closely.

Additionally, there is a general rule that an expense is only deductible if it is an expense that each and every holder of that employment would have to incur (EIM31640), although I'm not sure specifically how this works in practice with homeworking.

uknick

Pennywise wrote: »

Which is why you don't get any extra tax relief for the costs you've "chosen" to incur due to preference rather than necessary.

For employees, the test is whether the expense is "wholly, exclusively and NECESSSARY" - you fail on the necessary part.

Thanks Penny, I was wondering when "necessary" would get cited for allowable employee expenses.

tebthereb

If you can’t get relief under s336 or exempt payment under s316A
then depending on your employers appetite for it there are certainly ways of structuring this so you get relief for costs attributable to the home office (regardless of whether those costs are “necessarily” incurred). It’s not without risk of HMRC attack and there will be non-tax issues to deal with too.

DenABac

Pennywise wrote: »

Which is why you don't get any extra tax relief for the costs you've "chosen" to incur due to preference rather than necessary.

For employees, the test is whether the expense is "wholly, exclusively and NECESSSARY" - you fail on the necessary part.

What I was referring to when using the word preference, was the location itself.

I live over 500 miles from the next office. So it’s necessary to work from home.
However my employer could argue that I can live somewhere cheaper, say in the countryside.

However I’ll still incur higher expenses due to the additional room I have too have.

Back to my original question: Prior to 2006 the HMRC allowed for offsetting rent expenses, this had changed with the new manual.

Does someone know why that had changed? Or if there isa way to challenge their guidelines?

Best
D

BoGoF

It is not guidelines.....it is tax legislation. Usually only challenged by those with deep pockets.

Why does it matter why it changed. The fact is it did.