Director of Tax www.rossmartin.co.uk
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HMRC to issue guidance on use of home claims for the self-employed

25th Sep 2006
Director of Tax www.rossmartin.co.uk
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AIA

HMRC have announced that a new chapter is being prepared in the Business Income Manual (

BIM47800 - Specific deductions: use of home

).

It will explain what expenses are allowable when someone who is self-employed uses part of their home for business purposes.

There are no clues as to the content of the new guidance, but it follows that it may possibly attempt to restrict claims for certain items, perhaps for rent or council tax. Similar changes were made to guidance in respect of employees with a home working requirement per s.316 ITEPA and those who pass the "wholly, necessarily and exclusively" test in s.336 in October last year. Those changes were purely as a result of changes in HMRC's interpretation of ITEPA and were not based on any changes from the courts.

Following the publication of ITTOIA 2005, it is possible that HMRC have changed their interpretation of what expenses the self employed may claim, or more likely they are aiming to sure up guidance given to officers in what can be a particularly grey area. The majority of "use of home" claims for the self-employed require a fair amount of judgement, and the size of the claim will vary considerably between different trades and professions.

It would be handy for the self-employed to be able to set up some form of standardised deduction ' something akin to the £2 per week permitted by s.316 ITEPA, but as HMRC have recently withdrawn from using standardised deductions for the hotels and bed and breakfast trades, this seems most unlikely.

I have always worked on the assumption that one size does not fit all and each claim needs to be decided in accordance with the facts of the case, and relevant expenses apportioned if necessary. I am continually surprised to find accountants who automatically claim lump sum deductions under this heading for their self-employed clients. These regularly get challenged under enquiry.

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