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Use of home as office - new rules

Use of home as office - new rules

I have been reading with interest the new HMRC guidance in their business income manual for self employed use of home as office claims which are clearly far more generous than previously, especially the allowance for mortgage interest and other fixed home costs.

I also note that their employment income manual dealing with the same issue has not changed and is still quite strict in applying the £2 rule and no allowance for fixed costs such as mortgage etc.

Presumably there has been a court case recently which has forced HMRC to change their BIM for self employed. And presumably, HMRC don't want to apply the same relaxation to their EIM.

My question is this - regardless of the HMRC manual (which is not law anyway), is there scope to apply the recent changes to employees/directors or is there some restriction or distinction somewhere that means that it really does only apply to the self employed.

I would have thought that there should be no difference in what can be claimed if two people are doing the same thing, one a sole trader and the other a director of his own company, and therefore the new guidance should, in equality terms, apply to both types of operation, but I suspect HMRC have some technicality somewhere that says otherwise.

Any comments would be appreciated.
Ken Howard

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04th Apr 2007 12:05

Rent office to company
The normal way round this is for the director to rent a room in his own house that he uses as an office to his company. The director then submits rental income accounts claiming a proportion of all the house costs in the same way a self-employed person would in the Land & Property section of his personal tax return.

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04th Apr 2007 13:06

Rent room to company
I am sure I heard there was an exception whereby a Director may not rent a room to his company and then claim Rent A Room Relief as suggested below.

Can anyone confirm this, or am I remembering wrong?

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04th Apr 2007 13:59

Phil
How right you are!

That's the trouble with recent responses not being available to read when you are typing up a reply, you have to rely on your memory or open another window! (AWeb techies please take note!)

Is doing rental accounts as outlined, then, the way around the RaRR not being allowed in the director situation?

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04th Apr 2007 14:12

I agree with Jenni
... about not being able to see previous responses when typing your own comment.

Of course, if you used Firefox as your browser you would only need to open another tab and even Internet Explorer has finally caught up with tabbed browsing in V7.

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04th Apr 2007 16:19

Use of home as office
Ken

What new rules are you referring to?

Usually there will be a licence in place stating that the company can use the home office as its business office on a non exclusive basis for an agreed monthly rent.

The rental income is then income in the hands of the property owner/s and declared on the land & property pages of their tax returns less allowable expenses. NO claim for rent a room in these circumstances is applicable.

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05th Apr 2007 08:47

Jenni - Use a tabbed browser
"you have to rely on your memory or open another window" - or use your mouse scrollwheel 'click' to open the Post form in another tab ! Then it's easy to shuttle back and forth. Oh, and get a mouse with a scrollwheel !

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