My client, a self-employed lawyer with no staff, works from home and has claimed house overheads of about £5,000 in the annual accounts. The amount is based on actual expenses less calculated private use.
Ignoring both kitchen and bathroom, even though there is a degree of business use (e.g. making drinks and providing washroom facilities for clients), the house has a total of 8 rooms plus a hallway, which is counted as only ½ room, although it not only provides access to the business rooms but also contains a bookcase for some of the business library. Therefore, perhaps the hall should be counted as a whole room?
6½ (6 rooms plus the hallway) of the 8½ rooms are used for business which equates to 76.47%. Since none of the rooms is used exclusively for business purposes, an average private usage of 10% has been applied and the result arbitrarily rounded down to 60%, which equates to an overall private use percentage of 21.54%, which we feel is more than fair given that this is a single occupancy property.
The client basically lives out of his lounge and bedroom, neither of which has business use, plus the kitchen and bathroom. Most of the time, he is working in one of his 'offices'.
The Inspector of Taxes is not convinced over the claim and has commenced an "informal" enquiry. He believes that "the purpose of a home is to provide warmth, shelter and comfort to maintain the personal health and well being of its occupants."
I have pointed out that his interpretation could equally be applied to the workplace, citing The Workplace (Health, Safety & Welfare) Regulations 1992.
First he requested a detailed floor plan of the house and when told there was none, he then asked for the overall area of the house, the area of each room and the time spent on business in each room. His reasoning is that he "wishes to be satisfied with regards to the methodology in calculating the apportionment rate".
Surely the simple method I have used is acceptable without the necessity to resort to room by room measurements?
I am dubious about the direction he is taking by requesting to know how much time is spent in each room on business as (ignoring when it is being used privately) the room is still available whether it is actually in use or not. One doesn't actually have to be in an office for it still to be an office.
Another analogy is the claiming of motoring overheads whether the car is actually in use or laying dormant in the garage.
If anyone has had similar experiences or have thoughts or case references to impart, your input would be greatly appreciated.