Business Use Home As Office-How High Can You Go?

Inherited New Client - Previous Bookkeeper/Accountant Claiming £10,400 per annum (£200 per week) !!

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Just got new professional/landord client. She is a ex-solicitor (niche land & property specialist) who works from her mansion home.

Residential and commercial rents produce up to £150,000 rents per annum, other rental expenses are huge. Rent collection and office work is INTENSE and time-consuming. Client is a workaholic, probably working 16 hours a day at a guess, maybe more, 7 days a week.

Has anyone ever seen such a large figure for use of home as office. This is claimed as an expense against rents.

Mansion is on three floors & business operates from entire top floor. 

Only clues so far is that her home mortgage interest plus Council Tax costs are just less than £10,000 per annum.

But £10,400 per annum is about 10 times what my next largest home-based client claims.

Can anyone match that? Is she courting with disaster?

 

Replies (11)

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By frankfx
30th Jan 2020 18:03

Ask client for the calculations behind the claim.

Previous accountant may have been involved in the calculations.

Ask them, as you need to be consistent... ? Indeed will need the calculations as part of the retention of records

Was the amount explicitly raised at the approval stage of the accounts and tax return.

Check if HMRC have ever challenge d claim.

What will you do if the claim is clearly excessive....

In your opinion??

Good professional practice and procedures should not be alien traits to a qualified lawyer.

Thanks (1)
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By SXGuy
30th Jan 2020 18:10

Why not do the calculations and decide?

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paddle steamer
By DJKL
30th Jan 2020 18:26

Sorry, I do not buy it.

We collect in over £1m of rents a year and work less hours than that between us, and that includes drafting inhouse about 80% of our leases/licences .

I can buy the intense work if say actually developing as well as renting out, buying sites, planning, building takes a lot of time, but just gathering rents, really. (And we are also rebilling to tenants circa £75,000 of apportioned costs each year which takes a bit of time)

Our actual office costs,albeit we do not pay rent, just rates , insurance utilities etc is only about £13k a year all in and that is 2,000 sq ft of space ( a lot of unused/storage space these days)

Methinks they doth protest too much re the real time involved and the costs for use of house look insane.

Thanks (2)
Replying to DJKL:
By penelope pitstop
30th Jan 2020 18:48

I like to tackle insanity.

There are several of her Ltd companies being dealt with from the mansion as well, but then those companies ought to be paying a percentage of the use of the mansion home cost.

In that case the personal tax return property pages use of home should reduce for the shared used of the home between Ltd company and personal landlord work.

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By Accountant A
30th Jan 2020 18:49

Even in the economic wasteland where I live, a residential property letting business turning over £150,000 pa isn't that uncommon. 13 properties at £1,000pcm?

"Rent collection and office work is INTENSE and time-consuming." I'd ask why is it??

Anyway, as others say, if the calculations support, go for it but with the appropriate caveat to the client if you believe the claim is to the top end of what's reasonable.

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By frankfx
30th Jan 2020 18:50

The existing calculations , formally documented , should already be part of the retained accounting records.

I would suggest that ,if the figures are not erroneous £10400 booked rather than £1040, there was some bullying at the heart of the claim. With the accountant acquiescing , with the 'cover' ''they are your accounts''.

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blue sheep
By NH
31st Jan 2020 07:22

when you say she is claiming £10400 as an expense, what exactly do you mean - is that a deduction on her property pages of her SA or an amount she is putting through one or some of her companies?
It would be quite acceptable (probably) to charge rent to one of her companies but that would require in turn that it was declared as income on her SA

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Replying to NH:
By penelope pitstop
31st Jan 2020 07:39

As mentioned in my original post, the £10,400 is claimed as an expense against rents.

Never have I seen such a high figure. As recommended above, I will ask client where the £200 per week came from.

I have a faint suspicion it may be the annual cost of running her old office in the city centre which she has merely plucked and slotted it into her rental income computation. I will ask in February when the heat is off.

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Replying to penelope pitstop:
RLI
By lionofludesch
31st Jan 2020 09:07

penelope pitstop wrote:

I have a faint suspicion it may be the annual cost of running her old office in the city centre which she has merely plucked and slotted it into her rental income computation. I will ask in February when the heat is off.

Tomorrow, you mean ?

If that's what she's done, it needs explaining to her that, whilst she might've spent £200 a week, she chose not to. And she can't claim tax relief on something she might have done.

Does she need the whole floor ? How many staff does she have ? I'm sure you can deal with the calculations but, if her mortgage and council tax for the whole property barely scrape past £10,000, she must have a helluva gas bill to be able to make such a claim.

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By essex accountant
31st Jan 2020 13:09

Why not tell her she will have to pay CGT on one third of the gain on the house, she may think again?

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Replying to essex accountant:
By penelope pitstop
31st Jan 2020 14:48

Well spotted. I had already advised her on this.

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