Work from home - what can i claim for?

[mejorantes]

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Hi all,

Just doing my self assessment tax return. As I was working from my own house for the tax year 2006-2007, what can I claim for as expenses......electric, water, gas, coucil tax bills, broadband etc??

Thanks

[Bud]

Provided only as a guide - I have no accountancy skills:

In an effort of trying to be helpful this is a list of what I have been advised to claim for:

Telephone - less personal use estimate eg.30%
Broadband - less personal use estimate eg.20%
Use of home office - Percentage of household bills & rent/mortgage interest according to office space used and communal areas.
Software Purchased
Computer Equipment
Office Furniture
Repairs (eg. replace monitor)
Depreciation Computer Equip - 50%
Depreciation Computer Equip - 50%
Depreciation Software - 50%
Depreciation Software - 50%
Depreciation Furniture - 25%
Depreciation Furniture - 25%

This is not comprehensive as it will of course depend on your individual circumstances.

The best advice though is to seriously think about getting an accountant. They will more than pay for themselves!

I hesitated at first but mine has probably just saved me many times his fee alone this year, and, perhaps more importantly, I can be confident that everything is correct.

[drivetowin]

You need to check with an accountant (Keith from HRBS where are you!!) - but I think I'm right in saying that you can claim for household bills based on how much of your house is used for your business, i.e. if you work from a study and that represents 10% of the floorspace of your house then you can claim 10% of your household bills for heat and light. Broadband you can claim 100% if it is exclusively for business use (one good reason to get a separate phone number for the business).

[jonsp]

As I understand it you can certainly allocate a percentage of your house as being for business use but if you do so when you sell the house (assuming it's gone up in value) the percentage you allocated for business will be liable to capital gains tax because it's not a private dwelling.

I'd be glad to be wrong on that as I've just bought a house with an outbuilding that will be my office - my accountant has advised not to class that space as purely for business use but as part of the house.

[darrenb]

Just make sure if you use a room as an office don't make it exclusively for that purpose. If your office or room used is available as a room for guests to sleep in, kids to play computer games / watch tv in then use is not exclusively business and full private residence relief should remain.

[ian-d]

Yes, there are countless things, drop hrbs a PM, know he's busy with tax returns etc this month but sure he'll be able to assist. Keith (hrbs) saved me more in tax than he cost me for the whole year when i was a sole trader, what all good accountants should do.

[mejorantes]

Thanks for the replies guys.

I think I have left it a bit late this year to get an accountant involved, and to be honest there is not really that much I can claim expenses for. So far just PPC expenses, hosting, broadband, domain names and a few scripts.

Also while I am at it...I am taking full advantage of being an affiliate by living/travelling in south america since March 2007. How do I stand with paying taxes for 2007/2008 if I will not have actually been in the UK at all?

[Bud]

Bring the tax man back 2 donkeys, a hat and a Llama - that should cover it!

So jealous - Have a great trip.

[hrbs]

Hi

Brief reply ...
Tax deductible expense guide on my website at Tax deductible business expenses

HMRC manual on use of home at Specific deductions: use of home: contents [HMRC page].
Round sum figures are allowed depending on the business use proportion, if you have several servers running 24/7 in an office/spare room then a high % of your electricity bill will relate to this. However, if you use a portable on your dining room/kitchen table then business use will be small so £5 per week may be a reasonable estimate based on floor area used for the business and time spent on the business per week/month.

If you have registered for online filing then submitting your return online should be straight forward (HMRC servers permitting!)

Best wishes

Keith
Fixed Fee Accountants and Tax, VAT, Payroll Specialists providing proactive, professional service to small businesses - HRBSaccountants.com

[SpongeBob]

When claiming for something like gas/electric, can you use your normal bill for VAT purposes? Or do you need a VAT invoice? I have VAT invoices for other things, but not household bills.

[drivetowin]

For Gas/Electric bills the normal bill is a VAT invoice (though if they are like mine you might need to study the back of the bill carefully to find the VAT No and the Tax Point (mine are in 6pt font down the right hand side of the bill printed in landscape).

Remember that VAT on Gas and Electricity is at a lower rate than the standard 17.5% (from memory I think it's 5% but don't quote me on it)

[SpongeBob]

Thanks - yes, I've been working on the assumption that I can use the household bills as the invoice, as they do state the VAT on them.

However, what makes me unsure is that they (I just checked my BT and NPower bills) explicitly say on them 'This is not a VAT invoice'. So I've never been sure if I can use them or not!

[Andy-QuidsInUK]

I'd like to echo the above advice Get an accountant
It's the best thing we've ever done. We spent most of our first year of trading worrying about what we were going to do come Tax time. eventually we got a recommended accountant who takes care of everything. Not particularly cheap, but alot less expensive than an annual audit + fines for not carrying the 1, and it guarantees we won't be getting a visit from Adam Hart-Davis

Our office is in our rented Home, it's seperate and only for business use, but we don't claim anything towards the rent. I believe we can, but it causes complications.

We use a seperate line for all our business calls, which makes things easier come tax return time. Its better than going through every bill highlighting business calls.

As for what you can claim for, no-one seems to have mentioned cars or travel.

(the below is my interpretation of our accountants advice, I am not a qualified accountant!!)

If you have a good motor that's worth a fair amount, you'd be best to claim for a percentage of it's worth. I don't know what that percentage is though. Get an accountant.

If your car is a heap of junk (like mine) you're best off claiming for your mileage. I think it's 40p per BUSINESS mile. Don't go adding shopping trips or days out, that's just asking for trouble.

If you simply use public transport, then I think you can claim the full amount, so long as you keep your tickets.

I'd like to finish with this gem of advice: Get an accountant.
Ours is saving us alot of sleepless nights

[hrbs]

If you have a good motor that's worth a fair amount, you'd be best to claim for a percentage of it's worth. I don't know what that percentage is though. Get an accountant.

If your car is a heap of junk (like mine) you're best off claiming for your mileage. I think it's 40p per BUSINESS mile. Don't go adding shopping trips or days out, that's just asking for trouble.

If you simply use public transport, then I think you can claim the full amount, so long as you keep your tickets.

I'd like to finish with this gem of advice: Get an accountant.
Ours is saving us alot of sleepless nights

Hi

Cars: tax deduction is given by capital allowances (25% pa for cars less than 12k, £3k fixed for cars > £12k). This is then multiplied by the business use %age.

eg car cost £10k, capital allowance at 25% (yr1)= £2500 x 50% business use = £1250.

Similarly for running costs, fuel, insurance, repairs etc, only the business proportion can be claimed. ie the non business amount is shown in the relevant disallowable expenses box on the tax return.

Easiest method is mileage at 40p for 1st 10k business miles, 25p thereafter. Keep a log of the mileage, date and reason for trip. eg PC World for ink/discs, bank, WH Smith for stationery etc . If you claim mileage no other motor costs can be claimed other than parking.

Capital allowances rules change from April 2008.

Other transport: Keep all receipts and make a log/spreadsheet of the purpose of the journeys ... just in case ...client name, G2G etc .

If in doubt ... keep the receipt as your accountant may be able to justify the business element.

Avoid paying cash wherever possible as it makes it harder to remember that you've spent it several months later (debit/credit card transactions are helpfully recorded on statements).

Regards

Keith
Fixed Fee Accountants and Tax, VAT, Payroll Specialists providing proactive, professional service to small businesses - HRBSaccountants.com