I have spoken to HMRC on several occasions, but want a second opinion, and preferably direction to something written, such as a manual - so far HMRC have only given a verbal reply and cant point me to any direct reference material, I have looked through some of the PIM, CG64700-64750 and BIM47805-47820 manuals as best I can written confirmation - but cant find a definitive as to what areas of a dwelling house can be claimed usage.
I have a semi detached house, it is my primary residence, I am the live in landlord.
I have been letting rooms in my house 10 years.
I have had 4 lodgers, in 4 of the rooms last 5 years and had 3 lodgers in 3 of the rooms 5 previous years - these areas have been used exclusively as lettings.
When I started letting, 10 years ago I was advised verbally by HMRC to use a fractional calculation (ie 1/4 or 1/5) - but as I have looked closer I feel this might not be correct (reasonable).
My lodgers have a 'license to occupy' rather than a AST tenancy.
I have been self employed up till 31/03/2013, from 01/04/2013 I incorporated my business into a Ltd company.
In 2010 I constructed a workshop (approx 30 sq mt) in my back garden and started to use it self employment activities, it also has my gym equipment and drum kit in there, I also sleep in there at night - so the work shop is not exclusively used purposes.
In 2010 I also converted a run down garage adjacent to my workshop so it could be used to store some of my stock, clients work, and jobs in progress - I also store a small number of non business items in there such as tools, bicycle etc.
My garden is less than half a hectare.
I have measured all internal rooms in the house, workshop and store room. When using actual room size as opposed to a fractional calculation Usage - I arrive at quite different figures apportionment, and I consider floor area the fairest as it is more accurate. At present using what I've been told by HMRC - with the workshop included - 50% of the floor area is Private Usage, but going the fractional way it is 1/5 (myself and 4 tenants) which is only 20%, a big difference. Up till 2012 I have been using the fractional basis.
To calculate the Private Usage Adjustment - when working out the amount of expenses I can claim on my Tax Return, I am trying to establish what rooms can be included as Private Usage - calls to HMRC inform me that shared areas of the hall, landing and stairs cannot be included as Private Usage, and neither can the bathroom, but the kitchen can be included. My workshop can also be included as 'Private Usage', as its seen as part of my home, would the same go 'store room' then too ?. Again this is all verbal from HMRC.
Would HMRC would be happy with me claiming the workshop as part of my private usage, I question how a bathroom, which is plainly a shared area tenants - not be included, but my workshop - which is not shared can be included.
I also want to know the CGT implications, as this year I will develop my property and split the house into two flats, obviously with the Private Usage Adjustment calculation, I assume this implys how the apportionment Residence Relief is calculated (ie 50% Private Use) - and that figure will have an effect on the amount of CGT paid, so want to get that right, I also want to confirm there will be no CGT on my workshop - no part of it is used exclusively .
I will need help calculating that figure - CG65271 gives examples, but need some help at this stage just to get an idea of my forthcoming liability.