Anyone runs LTD company from home?

Mishomeister

Based on my conversation with HMRC if I deduct the allowed amount from my business for allowable expenses for running business from home ( I have 4 rooms use 1 exclusively for business so 25% of my council tax, utilities etc.) and then transfer money to my personal bank account to pay for this costs I will need to declare this transfer of expense as a personal income and pay income tax on it?

Is this correct?

Is there a legitimate way around it? As I see no point of this allowable expense if not.

Bookworm105

are you aware of the CGT implication of claiming 25% of your property is now given over to commercial use by a Ltd company?
Does your council tax know that?

re income tax
you say you have spoken to HMRC? i am therefore very surprised that you then mention claiming 25% of council tax as that is expressly disallowed. Water rates (unless metered) is the same, as (technically) would be the standing charges on gas and electric. The principle is the company cannot claim any costs which are fixed (ie payable by you irrespective of usage by your company). The company can only claim for incremental additional costs, eg extra gas and electricity it uses by virtue of its staff working in that space.

for the costs that are genuinely allowed then that income is free of personal income tax provided there is no profit element involved and you do not refer to it as rent charged to your company. You put an expense claim through the company and receive the money as (tax free) expense reimbursement.

whilst cutting tax is a fine objective is the money worth the extra implications, risk & hassle to you instead of just claiming the "no questions asked" tax free weekly/monthly fixed amount?

what does the company's accountant say given you are obviously out of your depth?

ChrisJ4839

I would expect this to be advised by your accountant. I work from home and claim certain tax relief as advised by my accountant. This way I know i'm covered in so far as my accountants do this for all those on thier books.

DullGreyGuy

Mishomeister said:

Based on my conversation with HMRC if I deduct the allowed amount from my business for allowable expenses for running business from home ( I have 4 rooms use 1 exclusively for business so 25% of my council tax, utilities etc.) and then transfer money to my personal bank account to pay for this costs I will need to declare this transfer of expense as a personal income and pay income tax on it?

Is this correct?

Is there a legitimate way around it? As I see no point of this allowable expense if not.

if 25% of your property is exclusively business you may need planning permission, may need to inform utilities companies and go onto a business tariff etc etc. You wouldn't claim council tax as a business expense but potentially pay the CT for the part of the property thats domestic and then Business Rates on the part of the building thats business. As others have said you will then also have capital gains tax for selling the business room later.  You'll potentially have issues with home insurance, your mortgage company may want to move you to a business mortgage as its no longer a purely domestic property.

A legitimate business expensive has to be exclusively for the benefit of the business, your home isn't. If you accept its not exclusively for your company's benefit then anything the company pays you is an employment benefit and as such will be taxable. 

I run my business from home, it involves using a 20w laptop and at times a 5w bulb. If I work 10 hours a day thats 250wh or 0.25kwh at £0.245 per KWG or 6p per day. Personally, its not worth my time and effort to try and argue 6p/day is a legitimate business expense 

Ultimately speak to your accountant, they will be the ones that have to defend you when HMRC come and do an investigation and threaten you with back taxes, interest and fines for tax evasion/ false declarations. 

frostiecuk

Get yerself an accountant, mate. They're proper worth it!

Bookworm105

DullGreyGuy said:

Mishomeister said:

Based on my conversation with HMRC if I deduct the allowed amount from my business for allowable expenses for running business from home ( I have 4 rooms use 1 exclusively for business so 25% of my council tax, utilities etc.) and then transfer money to my personal bank account to pay for this costs I will need to declare this transfer of expense as a personal income and pay income tax on it?

Is this correct?

Is there a legitimate way around it? As I see no point of this allowable expense if not.

A legitimate business expensive has to be exclusively for the benefit of the business, your home isn't. If you accept its not exclusively for your company's benefit then anything the company pays you is an employment benefit and as such will be taxable. 

as a blanket statement that is incorrect.
additional incremental costs for "use of home office" are tax free expenses when paid by the employer.

But it is much safer to claim the no questions asked £6/week allowance (£312/yr) rather than calculate and claim actual costs due to the pitfalls of invalid items and quasi substantiated apportionments.

DullGreyGuy

Bookworm105 said:

DullGreyGuy said:

Mishomeister said:

Based on my conversation with HMRC if I deduct the allowed amount from my business for allowable expenses for running business from home ( I have 4 rooms use 1 exclusively for business so 25% of my council tax, utilities etc.) and then transfer money to my personal bank account to pay for this costs I will need to declare this transfer of expense as a personal income and pay income tax on it?

Is this correct?

Is there a legitimate way around it? As I see no point of this allowable expense if not.

A legitimate business expensive has to be exclusively for the benefit of the business, your home isn't. If you accept its not exclusively for your company's benefit then anything the company pays you is an employment benefit and as such will be taxable. 

as a blanket statement that is incorrect.
additional incremental costs for "use of home office" are tax free expenses when paid by the employer.

But it is much safer to claim the no questions asked £6/week allowance (£312/yr) rather than calculate and claim actual costs due to the pitfalls of invalid items and quasi substantiated apportionments.

If it's not correct then say why @bookworm105?

You've gone on to say "additional incremental costs for home office use" which therefore would be exclusively to the benefit of the company and so wouldn't be captured by the text you've bolded.  Always more courteous to explain why something is wrong rather than say it's wrong and then go on to say something that agrees with what's been stated. 

Bookworm105

DullGreyGuy said:

Bookworm105 said:

DullGreyGuy said:

Mishomeister said:

Based on my conversation with HMRC if I deduct the allowed amount from my business for allowable expenses for running business from home ( I have 4 rooms use 1 exclusively for business so 25% of my council tax, utilities etc.) and then transfer money to my personal bank account to pay for this costs I will need to declare this transfer of expense as a personal income and pay income tax on it?

Is this correct?

Is there a legitimate way around it? As I see no point of this allowable expense if not.

A legitimate business expensive has to be exclusively for the benefit of the business, your home isn't. If you accept its not exclusively for your company's benefit then anything the company pays you is an employment benefit and as such will be taxable. 

as a blanket statement that is incorrect.
additional incremental costs for "use of home office" are tax free expenses when paid by the employer.

But it is much safer to claim the no questions asked £6/week allowance (£312/yr) rather than calculate and claim actual costs due to the pitfalls of invalid items and quasi substantiated apportionments.

If it's not correct then say why @bookworm105?

You've gone on to say "additional incremental costs for home office use" which therefore would be exclusively to the benefit of the company and so wouldn't be captured by the text you've bolded.  Always more courteous to explain why something is wrong rather than say it's wrong and then go on to say something that agrees with what's been stated. 

why should i spoon feed you, do your own reading.
You said ANYTHING. That word also means everything, and therefore such a blanket statement is not true, since out of pocket expenses are paid tax free.
Use of home is an out of pocket expense just the same as a restaurant meal when staying away on a business trip, The employee paid for it but it is a valid business expense. It is thus reimbursed to the employee as an expense payment, not all expense payments are "benefits"

DullGreyGuy

I didnt say all expense payments, I said payments for things that are not for the business benefit... if your employer allowed you to claim for your weekly shopping that would be a taxable benefit, effectively a former employer did by allowing you to get discounted Tesco vouchers for which income tax was deducted by virtue of them coming from the net pay. 

You are again selectively looking at only a part of a sentence 

Bookworm105

DullGreyGuy said:

You are again selectively looking at only a part of a sentence 

No I am looking at how your entire post hangs off your statement that all home related payments are benefits

... "your home isn't. If you accept its not exclusively for your company's benefit then anything the company pays you is an employment benefit"

this thread is about how to claim for the use of home.
It is perfectly valid for a company to pay you for use of home
That is not a benefit as you state, it is a tax free expense payment.

I respect your stance that 6p per day is not worth your time, however, that does not alter the fact use of home can be claimed. It is less common in practice to claim the actual due to workload of substantiating the calculation, but it is very common to claim the "standard" use of home allowance.
You should check with your accountant because if they are not claiming it for you they are somewhat negligent.

koru

You may find it is better not to use any room exclusively for the business, so that it is not subject to business rates or CGT. Just claim the £6 per week allowance for home expenses.