Contractors’ Questions: Can I claim use of home as an expense?

Contractor’s Question: If I adopt a sole trader status for my plan B project would I be able to claim expenses for the associated use of my home, as I will be running the business from my private residence? What other costs might I incur that I could offset because I can recoup them, partially or wholly?

Expert’s Answer: A deduction may be available for reasonable use of home as your office. The deduction must be based on a reasonable basis. For example if you use one of the four rooms in your house as an office for a full normal working week, you could claim a deduction of 25% of eligible and relevant home costs.

  • Eligible costs would include a proportion of:
  • Rent or Mortgage interest;
  • Gas, electricity, metered water rates, Council Tax, Insurance;
  • Repairs, decorating, cleaning;
  • Telephone;
  • Internet/broadband;
  • Computer items e.g. printer cartridges, stationery etc

Note: a claim for use of home for business purposes may have possible implications on the capital gains tax main residence exemption when you come to sell your property.

Education

Manuals and text books

A reasonable amount may be claimed for the cost of manuals and text books required for business purposes - receipts required.

Professional subscriptions

  • Costs for certain subscriptions may be eligible for deduction. These include:
  • Subscriptions to appropriate professional bodies
  • Professional journals, books etc
  • Professional indemnity insurance

See HMRC’s website for further details of allowable subscriptions

Office Costs

Telephone

Business calls from home or a mobile are fully claimable. However these must be itemised and line rental costs and internet cost are not recoverable unless you have a specific separate line for business purposes only. You must retain a copy of your itemised telephone bill.

Postage

Any business related post can be claimed for, original receipts must be provided.

Office stationery

A deduction can be claimed for any stationery such as paper, pens, printer ink you use for business.

Claims must be for a reasonable amount (in line with the business you run) and you’ll need original receipts to validate claims.

The expert was Paul Spindler, a technology partner at Kingston Smith LLP, the chartered accountancy firm.

Monday 25th July 2011