Use of Home

[SallyAnne]

Hi All,

Am I right in thinking that when you calculate how much you can claim for "use of home", you used to be able to count mortgage interest?

Or did I just completely make that up?

Cheers,
Sal

[DaveB]

This is the advice my accountants sent out back in January.

Please note that we now recommend to clients that they no longer claim the mortgage interest on the "use of home as office", following increased activity from the Revenue challenging the basis of such claims and mortgage interest in particular. It is still very rare they do investigate this item but we are erring on the side of caution with our advice!

This whole area is a grey one and we continue to recommend you draw a minimum £260 per year on the basis we do not know of a single case where the Revenue have challenged a claim up to this value.

The stipulated minimum from the Revenue is £2 per week. The £2 comes from the Finance Act 2003 where an employer can pay an employee £2 pw for the extra costs of working at home without tax implications and without the need for any proof of those additional costs.

You can of course claim more than this but should then have proper calculations to back it up (to calculate accurately, add up total household bills - electricity, gas, council tax, cleaning, insurances and rent (if paid!) - and divide by the number of rooms in the house (if you use a dedicated room for business purposes - if used 50% for business purposes, half the room cost, and so on). You will need to exclude bathrooms, WCs and entrance halls from the total rooms.


Which seems to be saying that you shouldn't include the mortgage interest but you can include the capital repayment part.

[scooterscot]

Costs PCM
Gas = £50
Electricity = £50
Cleaning = £?
Council Tax = £200
Rent = £1000 (I'd suggest mortgage interest is a no no)
Total cost per month = £1300

No. of Rooms
Kitchen 1
Bedroom 1
Living/Dining Room 1
Study 1
Total number of main rooms 4

Cost per room: £325.00

Therefore I'd charge my LtdCo £325 for use of one room PCM.

[SallyAnne]

Which seems to be saying that you shouldn't include the mortgage interest but you can include the capital repayment part.

Cheers Dave - SJD's contractor guide now says you cant include mortgage interest OR mortgage repayment. But you can include rent.

[chubba]

For the sake of getting an extra £60 tax free out of the company is it really worth running the risk of investigation?

And I thought you were in Norway!

[pickle]

Costs PCM
Gas = £50
Electricity = £50
Cleaning = £?
Council Tax = £200
Rent = £1000 (I'd suggest mortgage interest is a no no)
Total cost per month = £1300

No. of Rooms
Kitchen 1
Bedroom 1
Living/Dining Room 1
Study 1
Total number of main rooms 4

Cost per room: £325.00

Therefore I'd charge my LtdCo £325 for use of one room PCM.

There was a big article on this in the the most recent PCG Peridoical, "contracting Matters" or whatever its called.
It suggested that fixed costs (ie rent/council tax) are ok, but bills like gas and electricity are not. Suggest you dig the article out if you are a PCG member.

[rootsnall]

Cheers Dave - SJD's contractor guide now says you cant include mortgage interest OR mortgage repayment. But you can include rent.

SA - any update on the investigation ?

[scooterscot]

For the sake of getting an extra £60 tax free out of the company is it really worth running the risk of investigation?

And I thought you were in Norway!

Huh who? I don't use emm just an example. Did use it when I worked in Englandshire though...

[SallyAnne]

SA - any update on the investigation ?

Not yet.

Dont worry - I'll keep you all posted on that.