Hi there,
I'll try to keep this brief to save you time. Can I confirm that tax on rental agent's fees is an allowable expense?
Client is renting his flat and using his bedroom as an office from 9 - 5pm. He rented this flat from an agent to whom he had paid agent fees. Is this fees deductible?
Cheers, guys.
Replies (15)
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Tax?
What tax are you talking about?
Does the client have a business?
Some of the fees are deductible.
What is your relationship with the client? Are you his accountant?
What happened?
What happened to the tax in the original question?
So the IT contractor paid £500 to a rental agent for finding them a flat to live in. That is a personal expense.
They start using the bedroom to work in. They can claim rent for the proportion of time they spent in the bedroom working.
Yes
Peter, isn't time (in hours) also part of the function?
I would have thought that the Use was time. What did you understand it as?
My calculation
Space used is exactly 30%.
If you are in the bedroom for 24 hours then 8 of the 24 hours is used for business.
Calculation is £1,000 x 0.3 x 8/24 = £100 per month.
Check
Thanks, Peter. I understand the 8/24 used. I thought I saw somewhere that it was over waking hours instead. Anyway, that's fine.
Not too sure about the 30% thought - I know it's a small difference but why use 30% instead of 33% calculated as 300/1000 = 33%?
Check your calculation.
I make 300/1000 = 30%
base
I would use 17 hrs as the base (8/17).
Being - business hours (8) / total hours used (8 business and 9 in bed) as the business room is his bedroom.
I think HMRC use both 24 and 'total hours used' as a base in different examples, as either way seems fine, use the one that is best for the client (probably not 24 unless the room is used 24 hours a day)
Waking hours probably applied to business use of eg a sitting room with constant use except when sleeping - (the opposite of bedroom use).
The HMRC guidance uses 24 hours as a base for invariable expenses and the total time in the room for variable expenses, so 8/24 for rent, 8/17 for heat & light. In practice you could use either or an average of the two across everything, I doubt the difference will be significant and so long as there's a reasonable basis for the calculation I doubt anyone will quibble.
night hours
That's what I thought originally, but BIM47825 Example 6 shows Gordon using his room for 8 business hours and 2 domestic hours daily.
He apportions his fixed costs by time 8/10 based on total usage rather than 24 hours.
I now use this method for fixed costs, as it gives a better result and is approved as reasonable in the BIM.