Use of Home: Director

Use of Home: Director

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Is renting out a room to his company the only method for a sole director of a limited company to claim a use of home allowance? Or is it an acceptable alternative to claim a percentage of household costs, without having a rental agreement?

Thank you.

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By andy.partridge
28th May 2013 14:39

Not acceptable

Next question?

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Teignmouth
By Paul Scholes
28th May 2013 15:07

£4 pw

A director can claim up to £4 pw for the extra costs of running the business from home without providing evidence, otherwise, yes, subject to having an office built on to the house, with it's own utilities, then a rental agreement is best.  It's also much easier.

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Replying to FirstTab:
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By geroge
29th May 2013 11:52

But....

there are conditions for the £4 a week:

You must be employed specifically to work at or from home, and have no alternative but to do so

Or

Work from home under a 'home working arrangement'

For a typical one man limited contractor type (working on client site most of the time), they could argue they must work from home to write up the books etc,interpreting 'work' to include 'admin' work. A home working arrangement would seem not to apply (as it would be strange to agee to work from home voluntarily when that was the only possible place to do the admin work)?

 

 

 

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By yogic accountant
28th May 2013 15:08

employee use of home - hmrc rates

A recent consultation on this point under the heading a simpler income tax for small businesses produced this from HMRC -

 

HMRC propose that subject to the taxpayer meeting certain criteria, they will receive a flat rate allowance per month based on the amount of time the home is used undertaking core business activities. This would be a substitute for actual costs, so no additional deduction for actual expenditure could be made.

The standard amount for business use of home would apply if “core business activities” were carried out – by the taxpayer or an employee – at the home for at least 25 hours per month. No allowance could be claimed for that month in which the 25-hour test was not met.

HMRC say that “core business activity is work that provides goods or services to customers, or seeks new business (eg sales and marketing)”.

They state that the following activities would not qualify: storage; being on call/available to undertake work; and preparation of annual accounts, cash income calculations and tax returns.

Once the 25-hour criterion is passed, the level of deduction would be based on the time spent undertaking the qualifying business activity as follows:

25 to 50 hours amonth: a rate of £8 a month.51 to 100 hours a month: £16 a month.101 or more hours a month: £24 a month.

As a possible alternative, HMRC suggest that if the 25-hour a month test is met the rate would be £16 a month.

In its response to the consultation document, the CIOT preferred the suggestion by the Office of Tax Simplification of a standard amount (£5 a week) and a higher amount (£15 a week).

It commented, “If a business can demonstrate that a home is used for business purposes then the business should be able to claim the lower rate without any supporting evidence. The business should not have to demonstrate that the home is used for business every single week; just that taking one week with another the home is used for business purposes over the course of the tax year.”

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RLI
By lionofludesch
29th May 2013 11:13

I had a client once ......

I had a client once who worked out his proportionate household costs on a highly detailed basis as described in the HMRC examples and came up with £355.   He was pleased with his extra £199 (compared with the £156 which was the standard at the time) until I pointed out that he'd only benefit by the tax on the £199 - or £40.  Funnily enough, he hasn't bothered with the calculation since then.

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