Director's use of home claim under home-office licence

Director's use of home claim under home-office...

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I usually ask the client to summarise the household running expenses and then apportion this by the number of rooms and approximate business usage to derive an appropriate level of expenses.  I then round up to the nearest round-sum figure, so for example, if the annual expenses come to £974, I would claim £1,000 as "rent" in the company, which gives rise to a nominal £26 surplus in the personal tax return.

A new client has asked whether it's strictly necessary to round up to £1,000 instead of just claiming £974 rent resulting in a nil profit/loss. I think their concern is that as the residence is in joint names, the spouse (who is in PAYE) doesn't want to have to register for self assessment to declare land and property income just for this.

Apart from looking aesthetically nicer as a "round sum" £1,000, is there any reason not to claim rent up to the level of the expense claim only? 

Replies (5)

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By ShirleyM
23rd Jun 2013 12:52

Why ....

... would you not claim the actual calculated costs?

By claiming more, you are just making more work, for no real benefit.

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By sparkler
23rd Jun 2013 13:29

I agree, claim actual costs

I agree with Shirley - cannot see the point in rounding up and making a profit (however small) for the sake of it.  I always use actual costs to calculate the rent.

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By andy.partridge
23rd Jun 2013 14:33

Cart and horse

I'm confused.

If you have a licence agreement this is something that is normally contracted for in advance. So, you may have a contractual agreement whereby the company pays eg. £100/month for the rental of office space in the home.

When it comes to tax return time, the costs will be calculated in arrears. The personal tax return will indicate a profit, a loss or just as likely a break-even position on the deal.

The claiming of 'expenses only' is irrelevant because the director can not claim a portion of fixed property expenses without going down the licence agreement route.

A spouse would not need to register for self-assessment purely in respect of land and property if the profit was less than £2,500, but they would of course have to disclose any profit and pay tax on it.

 

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Replying to DJKL:
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By geroge
23rd Jun 2013 14:21

The licence agreement can base rent on running costs calculated (on basis as agreed) for the relevant period?

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By Ned Ludd
23rd Jun 2013 18:34

Interested in this licence agreement
Is there a sample one online anywhere

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