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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4973
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I have just moved contracts and am now working from home

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Hi, I have just moved contracts and am now working from home 3 days a week full time. I have been advised that in order to claim expenses for home office, I also need to have a rental agreement in place. I am Limited Company. Most of my contracting colleagues do not have a rental agreement in place but still claim the apportioned home office expenses. Can you provide any guidance on this? Many thanks, Irene
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your question...To keep matter simple and avoid scrutiny by HMRC, a figure of £4pw is allowable before the need for any receipts.Guidance from HMRC on specific deductions: use of home can be found herehttp://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm The alternative is to claim use of home as office expense based on actual costs and these are explained here under reclaiming the cost of power, electricity, telephonehttp://www.companybug.com/home-office-expenses-limited-company/ You accountant is right in saying that if your wish to claim rent for use of home as office then there should be a formal contract would need to exist to cover rental agreement between you the director and your LTD Company (as it is a separate legal entity). The situation would be different if you were trading as a sole trader. Guidance on this can be found under "Different rules for limited companies and sole traders" I hope this is helpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer: replied 1 year ago.
Is there any formula I need to use for the rental agreement?
Customer: replied 1 year ago.
....I mean, to provide me with the cost of rental?
Expert:  taxadvisor.uk replied 1 year ago.
Irene, thank you for your reply. My basic advice is be reasonable .. there is no set formula.I run my accountancy practice from home and also have a client who runs his LTD business from home.If you have a room/study and say that represents 15% of your living spaceyou could apportion your costs on this basis and use this as the basis of your rental agreement. I hope this is helpful.
Customer: replied 1 year ago.
Hi, thanks. When you say apportion the costs, am I apportioning the costs as a percentage of the mortgage? I know the rental would be seen as income. If I apportioned my costs as a percentage of the mortgage, ie, 1/7th (7 rooms), then my expenditure would be more than the income from the rental. Is that something that is common for those who claim in this manner? Also, if I take for example, my home broadband, is this something that is able to be claimed as an expense, but not within a home office scenario? Sorry, this might be crossing two separate questions now!
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply. I suggest you look at example 4 in BIM47825 here. It considers establishment costs and how these costs have been apportioned and this should be helpfulYou can treat telephone costs including internet as a separate item of expense.http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm I hope this is helpful and answers your question.If there are no more issues, I will appreciate if you would kindly rate my service/accept the service I have provided before you leave the site, to ensure I get credited for it by Just Answer.
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