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Ask Your Own Question, 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

Resolved Question:

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: 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 here 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, telephone 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: 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: 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. 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. and other Tax Specialists are ready to help you

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