Use of home expense - unusually high value

Client has done alot of repairs to his house in 21/22 tax year trying to decide what is reasonable

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Client is an artist working from home. He does all his painting at home and holds regular exhibitions at his home during the year. Works 50-60 hours a week from home.

The house is a very large house (20 rooms which includes halls, landings, kitchen, bathrooms, toilets almost 4,000 sq feet). Historically we have apportioned household running costs using a use of home as office calculator and we have generally ended up claiming around 50% of household running costs to set against the art business.

This has been based on 5 rooms with no business use (3 bedrooms, kitchen and bathroom) 5 rooms used primarily for business (an office, main studio, main storage room and smaller storage room and main exhibition room), 10 are split use (including halls, landings, 2 of the toilets, cellar (used for storage of both art and personal stuff) and 2 reception rooms that are generally not used from week to week for either business or personal use but are used for open house exhibitions from time to time during the year.

I have always been comfortable with this split which seems reasonable.

He has also made sure the primarily "business use" rooms get some private use too - for example the main studio and main exhibition rooms are sometimes used for family and friends gatherings however the client knows that should he ever sell the house there may be a CGT issue with these rooms, although having lived there for nearly 50 years then barring unforeseen events it is unlikely they would ever move anyway.

This year he has spent a large amount on repairs and maintenance to the house including roof repairs, roof insulation, asbestos removal, new central heating system including new boiler and radiators, major electrical work. I believe it is okay to include these general household costs in the total of costs before apportionment. Would colleagues agree re these items ?

Having been happy with the apportionment in the past I know there is no logical reason to change the apportionment,  but just conscious a large number from repairs and maintenance suddenly appearing on the return might set alarm bells ringing.

Is a white box note worth including to explain the large value of items included and the calculation of apportionment?

Replies (18)

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By meadowsaw227
19th Jan 2023 13:09

Would the repairs need to be done irrespective of there being a business in part of the house.
If yes I would not include much of said repairs

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Replying to meadowsaw227:
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By cohen
19th Jan 2023 13:19

i disagree

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Replying to cohen:
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By meadowsaw227
20th Jan 2023 14:41

As is your right ! .

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By Hugo Fair
19th Jan 2023 14:08

Client may well do "all his painting at home and holds regular exhibitions at his home during the year. Works 50-60 hours a week from home" ... but what is the status of the trade (both in terms of taxation and of scale)?

I only ask because if he has been living there for "nearly 50 years" (all of which sounds uncomfortably like me), then is he a successful artist or merely a hobbyist?

These things shouldn't matter but the materiality of these extra costs is likely to have a bearing on their visibility to HMRC at the very least.

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By paul.benny
19th Jan 2023 15:11

It's easy to be distracted by the taxpayer having an uncommon trade that people also do as a hobby.

This is a wholly different scale from someone operating a business from their kitchen table.

How would you treat repairs to a pub premises owned and operated by a resident landlord? Or perhaps even a B&B?

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By Openhouse
19th Jan 2023 17:40

Hi
Just to confirm this client is a serious artist and has been for many years.
His sales of art are usually between 50,000 and 70,000.
He will usually have a number of paintings on the go at the same time and there are completed works all over the place; he also held 6 separate exhibitions of his work at his home during the year covering almost 20 weeks and it is during these weeks that he spreads out into other reception rooms around the house

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By Openhouse
19th Jan 2023 17:40

Sorry annual sales of art 50,000 to 70,000!!

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Replying to Openhouse:
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By bettybobbymeggie
19th Jan 2023 17:46

With a £70k turnover and a 20 room house there can't be much left over unless the household has substantial other income!

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By Openhouse
19th Jan 2023 18:54

House was bought for a relative pittance nearly 50 years ago so no mortgage and no kids left at home. The client doesn't travel or go out much so personal living costs are pretty frugal!

Would a white note be a good idea just in case HMRC decide to have a look then at least they can't deem it a "discovery" OR, as turnover is less than 85,000 do the opposite and just do a short form version of the self employment pages.

Having redone all the research on this over last day or so BIMs 47800, 47815 and 47825 and the law S34 ITTOIA .. working from home expenses and apportionments of expenses are a pretty grey area to say the least and one person's view of a just and reasonable apportionment will differ from anothers!

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Replying to Openhouse:
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By Hugo Fair
19th Jan 2023 20:27

I'm not sure what you deem a 'pittance nearly 50 years ago', but my similar sized property bought at that time cost £16,000 - which sounds tiny until you consider it in the context of an annual salary of just over £2,000. I can assure you that I required a mortgage!

But my earlier questions "what is the status of the trade (both in terms of taxation and of scale)?" were simply trying to uncover the 'now' issues.
Namely the type of tax at issue (IT as self-employed?)
... and whether the trade's profitability would indicate to HMRC a viable & ongoing business (as opposed to a hobby/lifestyle operation that just about covers its costs - whilst subsidising the taxpayer's day-to-day living).

As you say, this is an area with loads of grey interpretations ... and I felt that this was one aspect which HMRC *might* try to attack if stirred into action by what I assume are substantial costs.

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By tltodman
19th Jan 2023 19:22

Not answering your question ... but I didn't think you included kitchens, bathrooms and toilets as "rooms" when you were doing the apportionment of rooms for business use and total rooms in the house

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By Openhouse
19th Jan 2023 20:50

I used the total floor space of the house as a starting point. Some rooms I treated as private use only (bedrooms, landing on the bedroom floor, kitchen, bathroom), some as dual purpose and some as primarily business use to come up with what I felt was a reasonable apportionment of the total floor space.

So repairs specifically related to the private use only rooms were excluded but more general repairs like to the roof and central heating were apportioned.

The client has a serious art business with a good and consistent turnover over many years and a decent profit on which he pays tax.

Sorry Hugo I shouldn't have said pittance but the purchase price of, coincidentally, around 15,000 all those years ago means he has no mortgage costs or anything like that to worry about. Of course this year with such a large house heating is going to be a nightmare!

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Replying to Openhouse:
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By DJKL
19th Jan 2023 23:12

And finding the cash to pay for all these repairs he has just had done.

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By tom123
20th Jan 2023 07:57

I am impressed with that level of income - speaking as the husband of an artist..

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By ireallyshouldknowthisbut
20th Jan 2023 09:58

Its like footballers, no cash in the little leagues, but if you are in the sought after people pay you ridiculous sums of money.

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By Openhouse
20th Jan 2023 10:22

Many thanks for comments. Any thoughts on the apportionment method? Also is it reasonable to include general repairs that affect the whole house (to roof and overhaul of the entire central heating system)? I believe it is okay to apportion these between the part of the house used for business and the part that is private.
Would it make sense put a white box note in to explain to HMRC how the apportionment has been calculated or is that more likely to rouse HMRC interest?

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Replying to Openhouse:
By ireallyshouldknowthisbut
20th Jan 2023 11:07

Well if you are happy with the business/private area split (and i would do as you have, go both ways, room and floor space to make sure it feels right) presumably you have seen photos etc if you haven't been there of the place covered in artists stuff, then I don't see why the repairs would not be allowable if there are covering the whole property.

Heating is an interesting one. I assume many of the 'occasional' rooms are not heated, and only when in use so the apportionment there might be on a different driver.

on a different scale I have a client with a 1 bed flat and we claim 50% of the rent and quite frankly well over that is his workspace. He has equipment under his bed, its all over the place. No wonder he is single.....

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By Jane Wanless
20th Jan 2023 11:22

"he also held 6 separate exhibitions of his work at his home during the year covering almost 20 weeks and it is during these weeks that he spreads out into other reception rooms around the house"

OK, the house hosts exhibitions over weeks, but how many people visit? Is the "business use" 2 visitors per week, or 20 per hour? If towards the lower end, are the rooms being "used" for business?

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