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Where Taxpayers and Advisers Meet

Corp Tax questions - Working from home

Blackmamba
Posts:3
Joined:Tue Jan 16, 2024 12:35 pm
Corp Tax questions - Working from home

Postby Blackmamba » Tue Jan 16, 2024 12:50 pm

Hi there,

I am interested to see what the correct approach is for working from home allowance.

My accountant says that the most I can claim is £29 per month, but I have friends who work in the same industry as me who's' accountants let them claim for a percentage of the house off of their Mortgage Interest. For instance, say a house has 10 rooms (excluding kitchens and bathrooms) if they use 6 of those for working, then they can claim 60% of their mortgage interest payments against their taxes. My accountant said that this is ridiculous and they would be opening themselves up to Capital Gains tax on the property when they sell it. I told them what my accountant said and they said "they dont know much about taxes and let their accountant sort it for them and in any case, they aren't planning on selling their house anytime soon and would long retire and close the company before they sell it anyway". My job is digital content creation and I honestly do use the majority of the rooms in my house (80-90%) and have lots of proof of this if it was questioned. In anyway, if I could claim even 50% of my mortgage interest payments that would be a huge saving.

The other question I have is;
I am building a 4 car detached garage building on my property with the sole intention of renting out the above room on Airbnb. I asked my accountant if I could claim the cost (or some) of the cost against my taxes for the build (estimated around £40-50K) but he said that I cant. I can only claim for costs such as renewing the kitchen or bathroom in a few years down the line, not the initial cost. I was going to have 2 of the bays downstairs as a gym for guests to use and the other 2 bays for guests parking.

I've also got another outbuilding which has a Kitchen,Bedroom and Bathroom which is detached from my main house, but my accountant said that I can only claim for upgrades to this outbuilding if its rented on Airbnb (which is fine) or has a long term tenant in. He said that there were no other upgrades or advantages I could have, apart from buying things for guests (shower gels, shampoos, soap, toilet rolls) and that I could get a cleaner or gardener, but as long as it was just for those parts of the property garden - which is fair.

The reason which made me question #1, is because there are 3 different friends, who don't know each other, who work in the same industry as I do, and they have 3 different accountants who don't know each other who are all letting them claim for this? One of their accountant also lets them claim for a portion of the Council Tax, Electricity and part of their House/Contents insurance?!

Below are some links that I found, which kind of explain it but not with source/backup.

https://www.gosimpletax.com/blog/working-from-home-expenses/
https://www.1stformations.co.uk/blog/working-from-home-7-expenses-you-should-be-claiming/
https://zlogg.co.uk/mortgage-tax-deductible-self-employed-work-home/#:~:text=The%20simple%20answer%20is%20this,allowable%20expense%20when%20self%2Demployed

Thanks!
Alex

wamstax
Posts:2018
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Corp Tax questions - Working from home

Postby wamstax » Tue Jan 16, 2024 9:30 pm

Try this GOV.UK calculator/qualification check. >>>> https://www.tax.service.gov.uk/claim-tax-relief-expenses/claim-any-other-expense
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

Blackmamba
Posts:3
Joined:Tue Jan 16, 2024 12:35 pm

Re: Corp Tax questions - Working from home

Postby Blackmamba » Wed Jan 17, 2024 7:01 pm

Hi there, that link doesn't tell me anything though. If I click Yes or No, it says the same answer "You can only claim these expenses using Self Assessment"???

bd6759
Posts:4239
Joined:Sat Feb 01, 2014 3:26 pm

Re: Corp Tax questions - Working from home

Postby bd6759 » Wed Jan 17, 2024 9:03 pm

Your accountant is correct.

The likelihood of a person using 6 rooms exclusively for their business is low. If that is the case, 60% of their house is not used as residence. Residence relief for CGT will not apply.

You aren’t self-employed so those links are irrelevant.

Cost of construction is a capital expense. It isn’t allowable.

wamstax
Posts:2018
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Corp Tax questions - Working from home

Postby wamstax » Wed Jan 17, 2024 10:25 pm

Additionally it is only the additional costs of working that is relevant.

While I make no judgement on your 80-90% usage I would say that such a scenario would be almost certain to raise an enquiry from HMRC.

Just to put it in perspective you would need to consider how many hours in a day you use the respective rooms wholly and exclusively for the purpose of your employment and how many hours each room is not used for the purposes of your employment.

All your circumstances would have to be considered. If for example you bought a ten bedroom house before you started using the rooms for employment purposes then the actual extra costs of working from home would not include mortgage interest.

There is also the requirement that any expense must be wholly and exclusively AND NECESSARILY for the purposes of your employment. It seems unlikely that you “work from home” Necessarily for the purpose of your employment ( in the sense that every employee in your position would need to work from home.

Take the £6 a week ( I.e. £312 per annum ) as your claim for expenses. I would have imagined or considered that if it was a requirement of your employment to work from home then your employer would have reimbursed you for such use of your home.

There are loads of potential pitfalls in making the ludicrous claims your friends accountant generated. There’s always somebody in the pub that professes to be tax experts without having read a tax book in their life.
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

wamstax
Posts:2018
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Corp Tax questions - Working from home

Postby wamstax » Wed Jan 17, 2024 10:43 pm

Look for HMRC’s take on your friends spurious claims

See it at >>>> HTTPS://www.gov.uk/tax-relief-for employees/working-at-home

Where you will see
WHO CAN CLAIM RELIEF
You can claim tax relief if you have to work from home, for example because:

your job requires you to live far away from your office
your employer does not have an office

WHO CANNOT CLAIM RELIEF
Who cannot claim tax relief
You cannot claim tax relief if you choose to work from home. This includes if:

your employment contract lets you work from home some or all of the time
you work from home because of coronavirus (COVID-19)
your employer has an office, but you cannot go there sometimes because it’s full

And your accountant has a lot more knowledge than the other accountant who seems to be bordering on negligence or lack of knowledge ( depending on the exact circumstances of your friend.He is also seems more than competent compared to your pals down the pub( who may have had one too many)
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

Blackmamba
Posts:3
Joined:Tue Jan 16, 2024 12:35 pm

Re: Corp Tax questions - Working from home

Postby Blackmamba » Fri Jan 19, 2024 11:38 am

Thanks for the responses. I see what you all mean about it potentially triggering an audit from HMRC if I claimed for 80-90% because it would be a massive outlier.

And I understand that HMRCs view needs to be "wholly and exclusively".

All of the rooms in my house have dual purpose, apart from my study/office, which I only use for working. The others I sometimes use for business and sometimes use for socialising/relaxing/sleeping etc.

Although if I claimed for 80-90%, could you not argue that it is a dual purpose room, so it's a 50/50 split, meaning an overall expense claim of say 40-45% - even if I got 25% back it would be nice.

On the flip side, I don't want to push the limits of things and get in trouble. I just didn't want to be unnecessarily not claiming on what would be a huge chunk.

Thanks for explaining that I can't reclaim for the cost of the garage building / annexe too. I presume there is no way around this either.

The industry is adult work / onlyfans based content (non-nude fetish content creation), which might explain the use of home a bit better.

I'm just baffled that 3 other creators, with 3 different accountants who don't know each other and haven't spoken to each other, all managed to claim for this? It seems hugely unlikely that they are all bragging/lying/their accountants are dodgy, unless there might be a chance there is something I don't know about?

bd6759
Posts:4239
Joined:Sat Feb 01, 2014 3:26 pm

Re: Corp Tax questions - Working from home

Postby bd6759 » Fri Jan 19, 2024 8:03 pm



Although if I claimed for 80-90%, could you not argue that it is a dual purpose room, so it's a 50/50 split, meaning an overall expense claim of say 40-45% - even if I got 25% back it would be nice.
No. If you use the room for 1 hour, that is 1 hour out of 8760 in the year. The fraction is 1/8760.

wamstax
Posts:2018
Joined:Wed Aug 06, 2008 3:39 pm
Location:Operate Nationally but based in Aberdeen
Contact:

Re: Corp Tax questions - Working from home

Postby wamstax » Sat Jan 20, 2024 8:47 am

Thanks Bd you beat me to it. The HMRC view is it is only the ADDITIONAL costs of NECESSARILY working from home SO in Bd’s example the other 23 hours in the day is not additional cost but the normal cost of that room that you would always have having bought a larger than needed house.
But be careful about the what/when you cannot claim above
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites

Fasteddie
Posts:22
Joined:Fri Nov 05, 2021 12:21 pm

Re: Corp Tax questions - Working from home

Postby Fasteddie » Fri Feb 16, 2024 6:42 pm

Erm, the title says corporation tax so what is the business status, sole trader or Limited Company? Sounds like you are a sole trader who works from home. I'm assuming sole trader. Case law includes a well known example of some guy who claimed for multiple rooms in his house - office, business library, etc, and was deemed to be "taking the p!55" to cut a long story short. Interestingly it is also assumed that if the use of the room is solely for the business purpose with no other use it can then be deemed as ripe for some CGT charge at a later date when you sell up - this is what your accountant is referring to I presume. He is sensible and his advice is sensible, he is protecting you. It is you who signs the tax return at the end of the day and it is you who are responsible.


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