Renting a Flat with an Office Room

Renting a Flat with an Office Room

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I'm in a situation where my hobby is turning into a self-employed business, and at the same time I'm looking to move home. In my current situation I just work from a computer within my flat and charge no expenses from the flat to my business. I am of course registered for NICs and filling out the correct returns in other aspects, but would like to solely consider the 'home office' tax implications - assuming it is acceptable to the landlord.

I am starting to look for a flat with 2 bedrooms and a living room (plus kitchen and 2 bathrooms) where I can use the 2nd bedroom as my office although equip it with a sofa bed for 2-3 nights a year when a guest may be staying. It is my understanding that a proportion of my rent may be applied as a business expense, along also with the cost of bills but that's not too much of a concern at this moment. Onto my questions:

1) Regarding the rent, if we were to say the flat with 2 bedrooms is in the region of £600 a week, am I correct in assuming that the very first thing one does is to break down the area of the flat by rooms that is associated with the business? I have read that you count the hallways and corridors as a 'room', but exclude the kitchen and bathrooms ergo resulting in a total of 1/4 or 25% of the total rent for the office area - does this first stage sound correct? Or is it in fact 33% as you don't count the halls etc? In either case the figure will be in the region of £8,000-£10,000 a year - the cost of renting in the very centre of London!

2) From further reading I understand that if a room is 100% solely used for business purposes then you are required to pay business rates - this is a business that has no deliveries, no guests and certainly no signs, just myself at a computer for as much of my time awake as I possibly can with trips out usually on the weekends but always 'based' from home. The nature of the business is very seasonal and even varies daily. Regarding that and the fact that it will be in use around the clock as some days I may work from as early as 6am, or until as late as 3/4am, or even through the night if it was required, but I would also like to keep the room in use as a guest room for the very few times it is needed. Where would this stand from a tax point of view? Over the year it's probably something like 8730/8760 hours a business room solely.

Your help and advice is hugely appreciated. As my accounts become more complicated I will be seeking a local accountant however this decision regarding my accommodation in the mean time may vary depending on the tax implications.

Kind regards,

Tim

Replies (3)

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By chatman
24th Jan 2012 00:40

Sounds mostly right to me

I would say 33% for the rent and bills, but if you spend substantially more time in the office than the bedroom and the living room (especially in the night when it needs more light and/or heat) then you could increase the percentage for bills.

I have never heard of anyone registering for business rates under such circumstances.

Using the office room as a guest bedroom 2-3 nights per year would mean you should reduce your expense claim by 2/365 or 3/365 (or any other reasonable proportion you can come up with).

If you ever buy a flat for the same purpose, the use for other purposes (eg guest bedroom) is essential to avoid the risk of HMRC asking Capital Gains Tax when you sell it.

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By Timbo
24th Jan 2012 10:55

Thank you very much for the informative reply, I have previously read and understand the conditions regarding use of the room if you buy a flat - for now at least I will stick to renting as it just seems to be easier for my situation across the board.

When we mention bills, what exactly can one include? For example can I assign 33% (if we chose that figure) of my council tax to the business?

Many thanks

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By chatman
24th Jan 2012 13:38

Includes Council Tax

Yes you can include a share of council tax, light, heating, redecorating of the whole place a proportion) or the office room (100%).

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