Can I claim for business use of home?

By Gina Gardner

Gina Gardner

 

In light of recent circumstances, many of our clients are now finding themselves using part of their home as an office and incurring costs accordingly. Below, we look at your options for claiming these costs as a business expense, so that you don’t find yourself out of pocket.

As it stands, and as part of the recent Budget announcements, HMRC are allowing businesses to claim a set £6 per week for the use of their home as an office, equating to a deduction from profits in the year of £312 (previously £4 a week). At the moment, without a more formal agreement or formal evidence of your time spent, this is the maximum that can be claimed as business use of home.

The alternative option, and a very tax efficient option to use, is putting a rental agreement in place between you and your company. This essentially allows the company to pay you, personally, a serviced office rental amount (depending on the household costs involved, this could be between £2,000 – £3,000), against which you can then offset certain household expenses.

The rent is chargeable to Income Tax at your marginal rate, however, once you have offset your allowable household expenses, this is likely to be minimal. The amount is also NIC free for you, and tax deductible for the company (saving Corporation Tax at 19%). You do need to be careful not to put at risk the Capital Gains Tax treatment of your main home, so a specific agreement is advisable.

Without a formal rental agreement, you can claim in line with the calculated expenses, but HMRC would require detailed schedules of time spent and evidence of your working from home to demonstrate the increased costs incurred as a result of working from home.

If this is an option you would like to explore further, please do get in touch and we can help you to determine the annual tax benefit of setting up such an agreement (or indeed the tax benefit involved if the arrangement is only temporary), and complete the agreement for you.

Gina Gardner is Corporate Tax Accountant at Randall & Payne – contact Gina on gina.gardner@randall-payne.co.uk or the Tax team on Tax@randall-payne.co.uk, or call 01242 776000.

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