22 June 2011
Many businesses operate partly from the business owners home premises even if its just to do the administration in the evenings after a day at the trading premises. HMRC will allow a reasonable proportion of costs incurred in the home where there is a clear case that the home is partly used for business purposes.
However, it is not uncommon to see sets of accounts with just a few hundred pounds provided for when there is reasonable grounds to charge several thousand pounds as an allowable cost.
As a rough guide, the approved HMRC method is to take your annual mortgage interest or annual rent plus utilities costs and home insurance, divided by the number of non-receptions rooms, divided by the number of rooms / space used for business purposes, proportioned by the frequency of use.
Be warned to keep your calculations should HMRC challenge your figures and make sure that any occupancy is always partly for business and partly personal use to avoid being hit by the Capital Gains Tax rules should you come to sell a freehold owned property.
Tip: Check your accounts to see what you are claiming for Use of Home as office. Be careful of what you can claim and make sure you get good advice as to how to protect against a possible CGT issue. Then start claiming a proper sum against your tax bill each year for what is a legitimate business expense.