Employee, home based, tax implications
Discussion
Hi all
Start the new job tomorrow, basically my old job before I went on a bit of a "finding myself" thing but 30% increased pay and based from home - success!!
Anyway, I've got a small room at home set aside for an office, it's only use beyond the office is as a storage room, and has no other purpose, I've read the guidance on the HMRC website and I reckon I'm fairly clear on what I can claim regarding most of the deductible things like rent/insurance, but have some queries
Assuming both my partner and I are employed, she works away from home during normal office hours 0900-1700, now, considering I'm at home say three days a week, can I deduct the heating costs of the whole house for those hours of those three days as if neither of us were home it would have been switched off?
I use my own phones (mobile and landline) for business purposes - the landline will be fairly straightforward but the mobile is a contract with a set allowance of minutes per month - the number of business calls will probably amount to around 75-80% of the use of the phone, am I overstepping the mark deducting 75% of the fixed contract monthly amount provided I can accurately determine the %age from itemised bills?
There'll probably be a heap more questions once I start to sit down and work things out but these are two big ones I've been pondering, obviously I'm trying to reduce my tax bill by as much as legally possible even if we're not talking millions...
Start the new job tomorrow, basically my old job before I went on a bit of a "finding myself" thing but 30% increased pay and based from home - success!!
Anyway, I've got a small room at home set aside for an office, it's only use beyond the office is as a storage room, and has no other purpose, I've read the guidance on the HMRC website and I reckon I'm fairly clear on what I can claim regarding most of the deductible things like rent/insurance, but have some queries
Assuming both my partner and I are employed, she works away from home during normal office hours 0900-1700, now, considering I'm at home say three days a week, can I deduct the heating costs of the whole house for those hours of those three days as if neither of us were home it would have been switched off?
I use my own phones (mobile and landline) for business purposes - the landline will be fairly straightforward but the mobile is a contract with a set allowance of minutes per month - the number of business calls will probably amount to around 75-80% of the use of the phone, am I overstepping the mark deducting 75% of the fixed contract monthly amount provided I can accurately determine the %age from itemised bills?
There'll probably be a heap more questions once I start to sit down and work things out but these are two big ones I've been pondering, obviously I'm trying to reduce my tax bill by as much as legally possible even if we're not talking millions...
This page tells you what you can claim as an employee:
http://www.hmrc.gov.uk/incometax/relief-household....
Note CGT & Business rates may come into play (I'm not sure if this applies to employees though):
http://www.hmrc.gov.uk/cgt/property/sell-own-home....
As ever when involved in tax matters a meeting with an accountant may be prudent.
http://www.hmrc.gov.uk/incometax/relief-household....
Note CGT & Business rates may come into play (I'm not sure if this applies to employees though):
http://www.hmrc.gov.uk/cgt/property/sell-own-home....
As ever when involved in tax matters a meeting with an accountant may be prudent.
Thanks folks
I was under the impression you could deduct a percentage of fixed household costs like rent/council tax etc but it seems not, not sure where I picked that up from...
Still, gas/electric would be a bonus, as would having most of the phone bill deductible as well
I do have a very good accountant but it's not the typical client/business relationship so I like to do as much of the work myself as possible and make his life easy - everything will be run past him
I was under the impression you could deduct a percentage of fixed household costs like rent/council tax etc but it seems not, not sure where I picked that up from...
Still, gas/electric would be a bonus, as would having most of the phone bill deductible as well
I do have a very good accountant but it's not the typical client/business relationship so I like to do as much of the work myself as possible and make his life easy - everything will be run past him
The rules are different for employees compared to the self employed.
Employees usually have far less scope for making expense claims because the criteria are stricter. The basic principle that HMRC follows for expense claims is as follows -
SELF EMPLOYED
Expenses incurred wholly and exclusively in the course of a trade
EMPLOYEES
Expenses incurred wholly, exclusively and NECESSARILLY as part of the conditions of employment
It's the NECESSARILLY that makes life difficult for employees. If you are OBLIGED by your employer to work from home, then you CAN make a claim for some home costs. If you CHOSE to work from home, you cannot.
Employees usually have far less scope for making expense claims because the criteria are stricter. The basic principle that HMRC follows for expense claims is as follows -
SELF EMPLOYED
Expenses incurred wholly and exclusively in the course of a trade
EMPLOYEES
Expenses incurred wholly, exclusively and NECESSARILLY as part of the conditions of employment
It's the NECESSARILLY that makes life difficult for employees. If you are OBLIGED by your employer to work from home, then you CAN make a claim for some home costs. If you CHOSE to work from home, you cannot.
Thanks Eric
The situation is that my "local" (about 1hr away) office has no additional desk space, the nearest one with space is about a 2hr drive.
As my work is >50% on site anyway, and where I'm living is pretty centrally located for 5/6 of the company offices, my old boss and I set it up that I would be mobile, technically based in the office ~2hrs away but working from home and on the road most of the time, with office visits every week or two to "check in" but things may pan out differently
So my contract and associated paperwork says I'm attached to an office but will work from home most of the time because it would be pointless me driving 4hrs a day just to do the same thing I'd be doing at home anyway!! Not sure how this would be viewed by the HMRC??
The situation is that my "local" (about 1hr away) office has no additional desk space, the nearest one with space is about a 2hr drive.
As my work is >50% on site anyway, and where I'm living is pretty centrally located for 5/6 of the company offices, my old boss and I set it up that I would be mobile, technically based in the office ~2hrs away but working from home and on the road most of the time, with office visits every week or two to "check in" but things may pan out differently
So my contract and associated paperwork says I'm attached to an office but will work from home most of the time because it would be pointless me driving 4hrs a day just to do the same thing I'd be doing at home anyway!! Not sure how this would be viewed by the HMRC??
If you can prove that working from home is stipulated as one of the conditions under which you are employed, then you can make a legitimate claim. If there is no formal written contract in place, perhaps getting a written letter from your boss outlining the arrangement would be good enough.
The whole point is to prove that you working from home is not voluntary.
The whole point is to prove that you working from home is not voluntary.
Thanks Eric
The contract states that "[My] usual place of work will be the [office ~2hrs away]" but all the written communication I have pre-contract signing makes it very clear that I'm not expected to be there beyond the visits I mentioned previously. I even queried the term explicitly with the MD when he sent me the final draft of the contract; he explained that for their admin everybody needs to be assigned to one of the offices but that the terms my old boss and I had agreed were how it would pan out in reality. As far as I'm aware I am the only person in the company (of ~125 employees) that has this kind of arrangement so I think they are trying to fit me into the system in some respects...
I'd have no problem getting a letter from my immediate manager (as outlined in the contract of employment) saying something along the lines of "Mr. T.LW is employed as based from xyz office but is expected to complete the majority of his work from home or on site due to technical and geographical constraints of the work etc etc yadda yadda"
edit to add: I'm not expecting you to tell me it's OK and then if I get pulled up on it in my tax return to point and say "well that bloke on the web said I was OK" - just a little guidance...
The contract states that "[My] usual place of work will be the [office ~2hrs away]" but all the written communication I have pre-contract signing makes it very clear that I'm not expected to be there beyond the visits I mentioned previously. I even queried the term explicitly with the MD when he sent me the final draft of the contract; he explained that for their admin everybody needs to be assigned to one of the offices but that the terms my old boss and I had agreed were how it would pan out in reality. As far as I'm aware I am the only person in the company (of ~125 employees) that has this kind of arrangement so I think they are trying to fit me into the system in some respects...
I'd have no problem getting a letter from my immediate manager (as outlined in the contract of employment) saying something along the lines of "Mr. T.LW is employed as based from xyz office but is expected to complete the majority of his work from home or on site due to technical and geographical constraints of the work etc etc yadda yadda"
edit to add: I'm not expecting you to tell me it's OK and then if I get pulled up on it in my tax return to point and say "well that bloke on the web said I was OK" - just a little guidance...
Edited by the_lone_wolf on Sunday 5th January 18:27
I wouldn't make any tax relief claims unless I had express written instructions from someone in the company that has the right authority.
Doing something on a semi-casual basis because it suits both parties isn't good enough, in my opinion.
The alternative would be to ask the employer for some extra money to cover increased domestic bills. After all, the tax relief is on the basis that it is costing the employee to be at home - using his own gas and electricity etc that he otherwise wouldn't.
Doing something on a semi-casual basis because it suits both parties isn't good enough, in my opinion.
The alternative would be to ask the employer for some extra money to cover increased domestic bills. After all, the tax relief is on the basis that it is costing the employee to be at home - using his own gas and electricity etc that he otherwise wouldn't.
Hi i recently moved from a role that sounds similar to your current position ( where you could work from home as often as you wanted, but your contract states your usual place of work as a named office )
To a role whereby my contract states i am a home worker.
I could not claim any tax allowances in the old role, but now can.
BUT - as per the HMRC website - only for the room(s) dedicated to working - so in a 4 bed house, with 2 rooms downstairs and using a spare bedroom as an office - i believe i am allowed to claim 1/6th of the full costs outlined on the website ( forgetting that i only work 5 days, bot 7 days a week )...
and to be fair 1/6th ( bearing in mind you only then get 40% of that back presuming you're a higher rate tax payer, then it doesnt add up to very much - but it all counts i suppose...
if the rules are radically different - I'd love to know - but this is how we ( maybe 10 of us here are full time home workers ) have read them.
To a role whereby my contract states i am a home worker.
I could not claim any tax allowances in the old role, but now can.
BUT - as per the HMRC website - only for the room(s) dedicated to working - so in a 4 bed house, with 2 rooms downstairs and using a spare bedroom as an office - i believe i am allowed to claim 1/6th of the full costs outlined on the website ( forgetting that i only work 5 days, bot 7 days a week )...
and to be fair 1/6th ( bearing in mind you only then get 40% of that back presuming you're a higher rate tax payer, then it doesnt add up to very much - but it all counts i suppose...
if the rules are radically different - I'd love to know - but this is how we ( maybe 10 of us here are full time home workers ) have read them.
Be a little careful in what you claim for on home expenses (or get clarification). There can be some issues to do with the increase in value of your home (or that portion of it you claim as an office) which can come back and bite you later on when you come to sell.
I was part of a team of 125 or so who worked from home for a multinational - the general consensus was that it wasn't worth the future potential cost to make some of the claims you were technically entitled to.
I was part of a team of 125 or so who worked from home for a multinational - the general consensus was that it wasn't worth the future potential cost to make some of the claims you were technically entitled to.
And yet....
every single client I have ever dealt with who runs their own business from home has made such claims and not one... I repeat... not one.... has ever had an issue when it came to sell the house.
As long as the use of the room is incidental and no major conversion work was carried out then there will be no problems.
There are CERTAIN businesses where working from home CAN cause a problem. For example, if a car mechanic decides to operate a car repair business from home and gets all the required planning permissions etc to do so, then there is a good chance that an element of the sale proceeds of the property will be subject to CGT.
Likewise, if a doctor or vet legitimately converts part of the house into a surgery, reception area etc then there is a good chance that CGT will be an issue when the property is sold.
Working at a desk in a spare bedroom or using a laptop at the kitchen table will NOT cause a problem - and making the allowable claims from HMRC for Use of Home in those circumstances will not trigger a CGT issue. Trust me - I would have come across this as a problem if it really was one.
every single client I have ever dealt with who runs their own business from home has made such claims and not one... I repeat... not one.... has ever had an issue when it came to sell the house.
As long as the use of the room is incidental and no major conversion work was carried out then there will be no problems.
There are CERTAIN businesses where working from home CAN cause a problem. For example, if a car mechanic decides to operate a car repair business from home and gets all the required planning permissions etc to do so, then there is a good chance that an element of the sale proceeds of the property will be subject to CGT.
Likewise, if a doctor or vet legitimately converts part of the house into a surgery, reception area etc then there is a good chance that CGT will be an issue when the property is sold.
Working at a desk in a spare bedroom or using a laptop at the kitchen table will NOT cause a problem - and making the allowable claims from HMRC for Use of Home in those circumstances will not trigger a CGT issue. Trust me - I would have come across this as a problem if it really was one.
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