Business expenses working from home - food busines

I am wondering what the guidance is as kitchen does not count as a room

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There is a lot of guidance for home office expenses, either flat rate or as a proportion of household bills. If a room is used as an office for 50% of the time and there are 3 rooms in the house, you can deduct 1/6th of rent, energy, council tax etc bills. Easy to work out if it's a home office but how to calculate it for food from home business? As a food business would use a lot of gas / electricity for cooking but it's in the kitchen which does not count as a room by hmrc. I am not sure how to proceed with actual costs in this case? The flat rate is way too low to offer a resolution as the business uses more in electricity alone (on top of private usage). Thanks in advance for help

Replies (21)

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By Hugo Fair
28th Aug 2023 20:45

Not meaning to be unhelpful, but 2 years ago you were a Courier getting into the complications of various VAT options ... with the suggestion to get professional advice.

Now everything seems to have changed (type of business and area of taxation) ... except for the suggestion!

.
The actually unhelpful (but valid) point is that there's nothing forcing you to set up a cooking business at home ... if you're convinced of the potential but worried about the energy costs (which you'd need to declare to your supplier as non-domestic usage) then you could hire suitable premises.

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By paul.benny
29th Aug 2023 09:39

I'm sure the OP has considered their food hygiene obligations and got the relevant consents from landlord/lender to run a business from their home.

Energy costs become subject to standard rate VAT based on consumption rather than a strict domestic/non-domestic distinction. I doubt supplier would follow a different basis. If you have consumption prior to starting the food business, you can use that as a basis for estimating the additional costs.

As Hugo says, professional advice recommended.

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paddle steamer
By DJKL
29th Aug 2023 09:57

Have a sub meter fitted if electric for kitchen can be isolated (depends how ring main set up/ what besides kitchen it services), likely you need to ignore lighting circuit.

If not possible but main/heavy use is say electric cooker, have sub meter on cooker only.

Gas sub meters are also possible but trickier to fit/more expensive to fit.

(In one of our properties we had about 40 electric sub meters in situ as we paid total bill and rebilled our tenants, number of years ago we had similar for both gas and electric for a block of 27 flats, catch is it can be tricky within a unit as you may need to reconfigure wiring to make it work)

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By J1643
30th Aug 2023 08:09

Thank you for replies and let me clarify my question further.

Firstly of all my courier business I managed to get the VAT sorted after a single consultation with accountant I set it up. This is unrelated to this food business which is to be ran by my household member. Hope that clears some confusion.

Secondly yes permission from landlord and all food safety inspections etc are underway. There is no need to get a separate energy supply as the energy usage is not excessive - the business uses all the same kitchen appliances as the personal household usage.

Which is why I am asking the question. How can I deduct that as expenses on tax return as there isn’t any guidance on that. The options I found, described below, are not relevant to my case.

Option 1 - simplified rates for working from home - £26 / month max. I need to be able to deduct more

Option 2 - the only guidance available is if it’s a home office and not a kitchen because kitchen does not count as a room. I would like to go down the route of proportion of costs (rent, energy etc) but how do I justify it if working from the kitchen not a spare bedroom? The kitchen will be used for business most of the time but overall household energy consumption will increase by something like 25-50% I am yet to estimate it or I am happy to go by comparing yearly average kwh prior to starting the business to average yearly kwh after, and put the difference as business expense, question is - is this an acceptable method of calculating that and would that proof be good enough? What about rent / council tax what % do i normally deduct? Like i said the only guidance I found is count the number of rooms in the house, excluding kitchen, and if one room in a three room house is used exclusively for business deduct 1/3rd. If not exclusively then further calculate percentage of usage, that’s fine but it’s going to be the kitchen in this case so how do I calculate it? Can I, perhaps, go by % of floor area (including kitchen and bathroom for this calculation) would that be a valid way to calculate expenses?

Thanks

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Replying to J1643:
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By Leywood
30th Aug 2023 08:24

J1643 wrote:

.This is unrelated to this food business which is to be ran by my household member. Hope that clears some confusion.

You really should not be giving tax / accounting advice to your household member when it is blatantly clear that you don’t know what you are doing. What else could you be doing wrong and letting your pal pay more tax than they need to.

Refer them to an Accountant. If you were happy with the last guy you used then point them in that direction. If not then search google for ICAEW or ACCA accountant.

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Replying to J1643:
paddle steamer
By DJKL
30th Aug 2023 10:04

J1643 wrote:

There is no need to get a separate energy supply as the energy usage is not excessive .

Yet from your original post,

"As a food business would use a lot of gas / electricity for cooking"

Well either it is a lot or it is not excessive?

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By J1643
30th Aug 2023 09:56

Thank you for all the pointless replies of „get professional advice” I’ve been doing everyone’s tax returns and all around that for 10+ years in various businesses, all simple sole trader and I only do what I am confident I am doing right. I’ve had basic training. Hence, if I am not confident in full vat, I don’t go for it simple as that. I asked a simple question on here so that I do not give them incorrect advice. If you are not willing to help please do not respond. Thank you. I will find out the answer even if I have to call hmrc and wait for an hour on the phone. I thought people on here are of helpful nature it looks that I was wrong.

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Replying to J1643:
By JCresswellTax
30th Aug 2023 10:16

Great idea, ask HMRC, you will definitely get the correct answer there.

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Replying to J1643:
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By Hugo Fair
30th Aug 2023 10:51

"I asked a simple question on here so that I do not give them incorrect advice. If you are not willing to help please do not respond. Thank you. I will find out the answer even if I have to call hmrc and wait for an hour on the phone."

1. The simple answer is that (based on the info provided) it would be inadvisable to claim ANY of the household expenses.
2. Other answers *may* be available after full disclosure of all salient info to an appointed accountant.
3. HMRC will not be bound by any 'answer' you manage to obtain from calling them, so they can still play hardball further down the line.

You may not rate professional advice (although that doesn't indicate much faith in whatever you're providing) - but it's designed to protect you from yourself.

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Replying to J1643:
Stepurhan
By stepurhan
30th Aug 2023 12:58

J1643 wrote:
If you are not willing to help please do not respond.

If you don't like receiving answers you don't like, don't post questions on public forums.

All the answers here are helpful. I strongly suspect you are grossly overestimating your accounting abilities. At best, basic training is going to stop you making the worst mistakes. It doesn't mean you are running this sensibly or correctly.

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By J1643
30th Aug 2023 16:34

Just answer my question and don’t look for issues in how I word it. I don’t need to explain myself to the public on here. I have read ALL available guidance on gov.uk and reputable websites and could not find answer there, hence I came here. Asking in general you don’t need the details you’re asking for. What I meant is that extra energy is more than £26 a month but it’s not as excessive to require a separate supply simple as that but that’s irrelevant. Just look at the below ignore all other info as you are all picking on irrelevant info.

I am running a business from home.
I know I can deduct £26 a month if working 101+ hours from home without justification
If I want to deduct more I need to justify it.
If it was a home office I would use room x time caculation.
But it’s the kitchen.
What formula do I use as a % of household expenses?

Anyone knows the answer let me know. Otherwise don’t reply. Thanks

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Replying to J1643:
paddle steamer
By DJKL
30th Aug 2023 16:45

Stick a meter on the cooker (you can get them from circa £30, see Amazon), take read when you start and when you finish, record the KWH used, work out average KWH cost from your bills, apply this to number of KWH used by business. IMHO HMRC will be fine if you can show your workings.

If a plug in oven/cooker on a1 3 amp maybe even this £10.99 one might work, if hard wired on its own circuit you need a cheap sparks fitted one which seem to cost circa £20-£30 plus the electrician's time.

Nevsetpo Power Meter UK Plug Watts Meter Cost Meter Power Monitor with Backlight
Visit the Nevsetpo Store
4.2 4.2 out of 5 stars 353 ratings
£10.98

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Replying to J1643:
paddle steamer
By DJKL
30th Aug 2023 16:49

I should have pointed out a non exclusive apportionment use of something like a kitchen will likely not amount to much anyway, even if entire kitchen deemed to be used 4 hours a day 5 days a week that would still only be 20/168 in hours used.

IMHO meter approach would likely be the easiest to calculate electric used in the trade.

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Replying to J1643:
Stepurhan
By stepurhan
31st Aug 2023 08:42

J1643 wrote:

Just answer my question and don’t look for issues in how I word it. I don’t need to explain myself to the public on here.


You don't need to explain yourself to the public. That said, you are the one looking for answers here so showing a bit of respect for getting FREE help might be in order.

I do know the answer ("allowing" me to respond under your criteria) but given your attitude I don't feel like posting it here.

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By J1643
30th Aug 2023 17:21

Thank you for advice on metering kitchen use, I already have such plug in meters so yes I can run a test then just measure time that will be pretty accurate.

What about rent / council tax proportion? For that the only guidance was by number of rooms (with disregard for kitchen / bathroom) I am wondering if I can work it out as a % of total floor area by % of time exclusively used for business?

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Replying to J1643:
paddle steamer
By DJKL
30th Aug 2023 18:45

I would read meter at start of cooking session and at end, write/record each time.

If nothing else it gives you a better idea of real profit creating whatever it is you create, in fact a notebook showing what was made (60 pork pies), ingredients used like X pork, y flour, z butter, w gelatine, pinch this or that etc with their costs, a column for opening KWH, another for closing KWH, another for average cost per KWH, another for resultant units times cost, then compare all costs with say the batch selling price- good evidence linking to recorded production that the reads are not porkies but are for porkies- this would actually likely be very helpful at outset anyway with margins etc (Chefs routinely cost their creations to check their SPs are well set)

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By ChefJem
25th Jan 2024 10:38

Hi OP. Did anyone ever give you any guidance on this or point you in the right direction for more reading? Or did they just continue to judge your choices and wording? I'm also a private chef that works from home quite often doing all the prep work, wondering how to allow for kitchen expenses. Came across this thread.

PS. I thought you handled the rather condescending replies quite well.

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Replying to ChefJem:
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By FactChecker
25th Jan 2024 13:19

D'oh!

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Replying to FactChecker:
paddle steamer
By DJKL
25th Jan 2024 20:20

FactChecker wrote:

D'oh!

A deer.

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Replying to DJKL:
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By FactChecker
25th Jan 2024 20:48

I thought the affronted chef might've enjoyed the self-raising option.

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Replying to FactChecker:
paddle steamer
By DJKL
26th Jan 2024 10:52

It's the yeast we could do.

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