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TonyTax
TonyTax, Tax Consultant
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I have my own Limited Business where I design, develop and

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I have my own Limited Business where I design, develop and test gas heating appliances for UK Manufacturers. I am a Director of the business but also a sole trader and employee. I operate from Home and have turner my double garage into a test facility.
My Wife (Company Sectretary) and I use other rooms for a Designing facility, Office work and a confidential area for meetings. Acting on the advice of my accountant we apportioned costs like electricity and gas relative to the room areas used.
We have to operate the Business from Home as we work long hours and renting a facilty is out of the question. We have a mortgage on the Property and pay interest.
So what I want to know as there appears to be a grey area; can I apportion the interest I pay on my mortgage in the same way I apportion my other costs as a chargeable overhead which stand at circa 33%. If not an acceptable claim for what every reason how could I change my situation so that I could, or is not possible at all.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Being a company director is not classed as being self-employed I'm afraid and your business status dictates what you can claim.

I cannot tell you why the law around such expenses is as it as and does not appear to make sense in some respects, particularly to a lay person, as I didn't write it or nor did I go through the thought processes which led to it. It is what it is and I've learned to accept it.

Take a look at the notes starting at BIM47800 here and read right through to BIM47825 by clicking on "Next Page " at the bottom right of each web page. These pages tell you what you can claim and under what circumstances if you are self-employed. The expenses employees and as far as I am concerned directors can claim are set out starting at EIM32760 here and ending at EIM32790 where there are some examples.

Employees and directors cannot generally claim tax reliefs for many expenses that the self-employed can. For an expense to be allowable for an employee or director, it has to be incurred "wholly, exclusively and necessarily" in the performance of their duties (EIM31630). You cannot claim that part of your house mortgage interest is incurred "wholly, exclusively and necessarily" for business purposes. For a self-employed individual, the term is "wholly and exclusively for business purposes". I realise this may seem like splitting hairs but that's the way it's been for pretty much all my 35 years in tax.

If you look at BIM47820 here, you will see that where a room is used for part of a day to the exclusion of all other activities during the tiem it is being used for business purposes, you can claim for more than simply a proportion of the heating and lighting costs against your self-employed earnings including mortgage interest and council tax. Any claim you make has to have a logical basis. HMRC may ask for significant claims to be backed up with a logical explanation.

I hope this helps but let me know if you have any further questions.













Expert:  TonyTax replied 2 years ago.
I have to go out for a while but I will be back this evening to answer any follow up questions that you may have.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15835
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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