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<b>Any Answers:</b> Use of home as an office in the wireless world. By Nichola Ross Martin

21st Apr 2006
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An Any Answers question this week week raised some interesting points for tax claims at some time in the future, when we all finally manage to embrace wireless technology (and it actually does what it says on the packet).

CF Clayton asked about CGT implications for part use of home for business, if no particular room in the house is specified for working from home.

He envisaged a self-employed person who is able to work in any room of the house using a wi-fi connection. He did not say it, but presumably this person is a true master of the paperless office. His "office" is fully contained in his lap top and mobile phone, he needs no files or permanent desking or even dedicated accommodation in which to run his business, just somewhere warm and dry to work.

What expenses might such an individual be able to claim when working from home? On the face of it I would suggest merely a small amount for light and heat, if he can prove that he is incurring extra costs from being at home all day. Without a dedicated office a claim for mortgage interest/council tax, or a percentage of household insurance seems highly unlikely. For CGT purposes, again there is no dedicated room and so part of the private residence cannot be designated at business.

The query goes on to ask about the CGT position for an employee with a home working requirement. The employer pays a charge for rent of about £72 per month, and again no particular room is used. There is unlikely to be a CGT charge in this scenario either, irrespective of the rent payments. The rent is an agreement between the employer and employee and although it might be indicative of something else, if the facts of the case indicate that no room is exclusively used for business, no CGT charge will be applied.

The query ends with a complication that a similar proportion of costs already claimed has been claimed against a Schedule A business. If that is the case, there seems to be the possibility that too many expenses have been claimed. If a cost in incurred once, one cannot claim it several times. If you want to be undisputedly accurate in claiming light and heat, take meter readings when the work equipment is on and off, and work out the cost per hour/minute for light and heat. This might be the best method of apportioning the expense.

Replies (3)

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By tim hervey
24th Apr 2006 13:08

Tax Bulletin 79
In the past, it has been suggested that a licence/rental agreemnet bewteen employer and employee should be made. This would rental from the employer against which the employee could claim expenses such as power, and rates etc.

In view of the article in Tax Bulletin 79 which refers to Tax Bulletin 68, would readers still consider the licence/rental agreement to be a better way to get relief?

My situation is similar to Example 3 in TB79; the office I worked in closed so as to run operations from just one office. My contract was amended by letter to confirm my place of work is my home. The nature of my work means I need to be near to London for meetings with third parties. Apart from such meetings, I only need to communicate by telephone, e-mail and Internet and a dedicated phone line with ADSL connection has been installed. The phone line is in the company’s name and the invoices are sent to the employer for payment. I go to the office once a month for team meetings. All my travel and overnight costs are paid or reimbursed by the employer.

The computer equipment I use is provided by the employer and the insurance thereof is on my household policy for which an additional premium was paid by me and reimbursed by employer.

TB79 now denies relief for council tax/rates, rent, water rates, mortgage repayments/endowment premiums, household insurance premiums. Relief is available for the additional gas/electricity re the home office. £2 a week will be accepted without question.

It seems a complete contradiction in TB68 to say ‘Government policy aims to support employers that seek to provide better work-life balance opportunities.’ (second paragraph of article) and ‘We anticipate that most employees who work at home under homeworking schemes will be doing so by choice and so will not be entitled to a deduction for any unreimbursed additional household expenses.’ (last paragraph of article).

Am I right in thinking there seems to be an attack on s.316A ITEPA 2003 payments not being deductible under s.336? Surely the two are completely separate, s316A is for amounts reimbursed whereas s336 is for amounts incurred and not reimbursed.

Of course, I do not use the room I work in exclusively for working in so there is no question of any chargeable gain.

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Dennis Howlett
By dahowlett
26th Apr 2006 06:14

It is typical of today's tax system
that a relatively simple problem requires a detailed response of the kind Nichola has kindly put out.

Here's an alternative. The business landscape has changed. Agreed? Mobile/home working is a sensible business reality that helps employees get greater satisfaction out of work.

Make a simple amendment to the law wher
1. the concept of 'use of home as office' no longer applies for CGT purposes.
2. government declares a flat rate allowance, reviewable annually that employers are allowed to pay and which is not taxable to the employee but remains tax deductible to the employer or, on the case of self-employed as a deductible expense.

Tax lost? Minimal. Smiles on faces? Everyone - including the bright spark in government who gets the PR value of such a move.

Thanks (0)
By StephenElms
21st Apr 2006 18:02

Home?office use
A proportion of home expenses may be claimed where a person works from home. In the case of a self-employed person the allowable expenses are normally related to the number of rooms in the house.

Therefore if there are 6 rooms in that house and 1 is an office then one-sixth of home expenses might be claimed.

So the wifi worker roams from room to room; in which case there would not be claims for office furniture / decoration etc, but there can still be a claim on the (in this instance) 1/6 basis - HMRC cannot dictate where somebody works and it is not unreasonable to claim the same proportion as if there was an office. Being a roaming home worker is in fact cheaper to HMRC than the H?O worker!

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