Use of home as office

Use of home as office

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I would be interested in people's views with regard to amounts which could be typically charged by a shareholder/director of a company with regard to use of a home office (not exclusivley used for business). The business is a 'one man' consultancy based at his home. Many thanks in advance.

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By stephenkendrew
22nd Oct 2012 12:30

It really does depend.

A single person spending most of their time working from home, living in a small flat with a large mortgage may be able to claim £1,000 per month. On the other hand someone with a spouse, half a dozen kids, a large house, little or no mortgage and only spending an hour or two working at home may only be able to justify a claim of £4 per week.

HMRC now allow a claim of £4 per week without any receipts so I would consider this to be the minimum claim. But any more than that really does depend on the circumstances.

The procedure should be that the director actually charges the company rent for using their home for business. This puts the director in the same position as someone with income from property and, therefore, can then claim a proportion of their household expenses against this rent. I usually make it so that the rent is equal to these expenses so that there is no taxable income on the director.

I think HMRC's guidance on this is actually quite useful although it looks at the position for a self-employed person. By charging rent this puts the director in that same position in terms of what can be claimed.

 

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By Tax1976
22nd Oct 2012 13:49

I guess that then means...

...that the director will need to fill in the property income pages of his/her tax return which could be a headache especially if the director currently doenst need to complete an SA return.

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By imbs
22nd Oct 2012 21:15

Slightly off the point but...
I thought all directors had to do tax returns anyway?
I never thought of getting the directors to raise invoices to the co, I normally just post a journal dr expense cr directors account. Should I be getting them to raise invoices? And completing land & property schedule?

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Replying to Accountant A:
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By frustratedwithhmrc
23rd Oct 2012 11:56

I thought all directors had to do tax returns anyway?

imbs wrote:
I thought all directors had to do tax returns anyway?

HMRC love to insist that this is true, but if a directors salary is covered by PAYE and there is no additional untaxed income (e.g. savings taxed at basic rate on which 40% tax is due), then there is no statutory basis for a tax return to be automatically required by HMRC.

I have had this raised in the past by HMRC and challenged it successfully.

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Replying to Mr J Andrews:
By George Attazder
23rd Oct 2012 11:36

There is no statutory basis for a tax return to be demanded...

frustratedwithhmrc wrote:

imbs wrote:
I thought all directors had to do tax returns anyway?

HMRC love to insist that this is true, but if a directors salary is covered by PAYE and there is no additional untaxed income (e.g. savings taxed at basic rate on which 40% tax is due), then there is no statutory basis for a tax return to be demanded by HMRC.

I have had this raised in the past by HMRC and challenged it successfully.

Oh yes there is.

I accept that a person isn't required to just file a Tax Return simply because they're a director, but S.8 TMA 1970 is clear that if HMRC send a notice to my granny to complete a Tax Return, then that is what she has to do.

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Replying to lionofludesch:
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By frustratedwithhmrc
23rd Oct 2012 11:55

But that is the only point I was making

George Attazder wrote:
Oh yes there is.

I accept that a person isn't required to just file a Tax Return simply because they're a director, but S.8 TMA 1970 is clear that if HMRC send a notice to my granny to complete a Tax Return, then that is what she has to do.

But that is the only point I was making, being a director alone is insufficient to require a return.

HMRC have a statutory right to formally demand one, but they have to formally exercise that right. Given the level of expertise available from frontline HMRC staff these days, that is often more than they can manage.

Equally, if the objection gets raised to someone who actually understands the legislation, they are probably smart enough to understand that issuing a section 8 demand where no tax is due is an unnecessary bureaucratic hassle which benefits no-one.

Equally, there are some vicious little Nazis at HMRC who will simply demand it BECAUSE it is an unnecessary bureaucratic hassle.

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