I am thinking of advising my clients to setup an exclusive use of home as office rental agreement.
The reason for going down the exclusive route (rather than non-exclusive route) is in order not to fall foul of the wholly and exclusively rules.
I understand that this could potentially have capital gains implications and therefore I am unlikely to suggest this as an expense for clients who are not in their "forever home". Those in their forever home are unlikely to trigger a capital gain as they are unlikely to ever sell their home in the first place.
Back to my original question, in the event of an investigation do you think HMRC would expect to see evience that the council has been contacted regarding business rates?
The amount of rent charged would be small, i.e. around £50 - £100 per month and should therefore qualify for small business rates relief.
My clients are generally micro-companies/computer consultants and therefore the office would just consist of a desk, chair and laptop.
I doubt HMRC would be interested in seeing whether or not the home insurers and/or mortgage company agree as this, hopefully, is none of their business. Although I am not sure if I will advise this to my clients with leaseholds as the freeholder may object to the running of a business from their property.
I would then declare the rent together with any expenses and restricted mortgage interest on their self assessment tax return.
Are there any other additional considerations?