Working from Home

ahorrando

Hi,
I work for a company (not self employed), but I work from home; is there any tax reduction or can I charge my utility, rent, telephone costs to my tax declaration?
any suggestions?
thanks
DR

reddevilled

It really depends on what is in your contract. Do you work from home because your contract states that you must, or do you choose to work from home because it is more convenient for you?

Cagey

I was going to post on this subject as well. My daughter works from home at the request of her employer. I have told her to claim for lecky,gas,room etc but she said she had been told it was not worth it.
Does anyone know the entitlements ?.

ahorrando

Hi reddevilled,
My employer defines that I work from home (homebased), is there any kind of tax beneffit?
thanks

Aark

The basic rule is that employees (whether home-based or not) can claim tax relief on expenses that are wholly, exclusively and neccessarily incurred for the purpose of their employment.

For example, you can claim for the cost of telephone calls that are neccessarily made for your employment but not the cost of telephone line rental (as it is not exclusively for business).

tinalives

I work from home and I've been told by my accountant that it's not really worth bothering claiming - but I don't know if that's because I'm a company director.

Mark7799

In all cases you can claim a PORTION of your domestic bills - mortgage (interest - not capital), gas/electricity, council tax (not water rates) & phone. The Revenue guidelines are to count the number of rooms in your house (reception & bedrooms only) and then consider the number of rooms used in your business .

e.g a study/bedroom in a home of three bedrooms & two reception rooms would mean a claim of 1/5 of the domestic bills could be claimed. However, this is on the basis of the room being in use on a 40-hour week and should be reduced pro-rata. Continuing the above example, a business that used a study for 2hrs per day & 5 days per week could claim 10/40 of 1/5 of bills (5% of the total). Phones can be claimed where it is possible to identify business called from itemised bills and a percentage of the line rental (depending upon what percentage of calls were business can also be claimed).

Another comment I should have added is that "room allowances" can only be claimed for times when a room is being EXCLUSIVELY for business purposes i.e someone doing paperwork in a lounge while someone else in the family is watching TV means that time can't be counted as 'business time' in the calculation of the previous paragraph.

Maybe this is why some people don't bother. There is an added complication that some local authorities may then consider if a property should be charged part business rates.... but's that another story.

Richie(UK)

Following on from Mark's caveat about business rates you should also be aware of a potential Capital Gains Tax issue.

Your main residence is exempt from CGT. However, if you state that you are using a part of it exclusively for business then HMRC may seek to deny relief for any gains arising in respect of that part of the house. By all means say that you use a certain room as a study, but not exclusively.

WHA

Mark7799 wrote:

In all cases you can claim a PORTION of your domestic bills - mortgage (interest - not capital), gas/electricity, council tax (not water rates) & phone. The Revenue guidelines are to count the number of rooms in your house (reception & bedrooms only) and then consider the number of rooms used in your business .QUOTE]

I think it is worthwhile clarifying this assertion a bit more as it is not strictly correct. The HMRC website includes instructions for tax inspectors as to what is allowable:-

http://www.hmrc.gov.uk/manuals/eimanual/EIM32810.htm

In particular:

(a) a proportion of mortgage interest is NEVER allowable.
(b) a proportion of buildings insurance is NEVER allowable.
(c) you can't apportion all those expenses mentioned "room by room" if the room used for business is also used for any other purpose (this excludes an office doubling as a spare bedroom!). In this case, only a proportion of heat and light cost can be claimed.
(d) you can only apportion other "household" costs on a "room by room" basis if you have one or more rooms that is used exclusively for business use.

So, at the end of the day, if your working from home is part time, and you use a room which is also used for any domestic purpose, the claim you can make is limited to the usage of heating and lighting which is likely to be very small.

The Inland Revenue have decreed that employers can pay their employees upto £2 per week towards the additional costs of working from home without it being taxable, so that is probably the benchmark figure you are looking at claiming.

Remember, though, that the amount is deducted from your income for tax purposes, not actually paid to you by the tax office, so if you are a basic rate taxpayer, your tax is reduced by 22% of the costs you claim.

So unless you have a "dedicated" room used exclusively for business use, the benefit to you will be neglible which is probably why some people suggest it isn't worth claiming for!

tinalives

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tinalives

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