Now more than ever, many contractors don’t have a separate office and instead will use their home as an office whether that be using a garden office, a separate room in the house or just using the kitchen table!
Of course, spending more time at home will lead to more costs for running your home and so understandably you may be looking to claim some of this through your company.
You may complete fee earning work from home or it may just be company bookkeeping and administration. In either case, it is fair that you should make a charge to your Company for this facility however calculating how much is a fair amount to pay is crucial.
How much can I claim?
In the past fixed rates of around £10 per week were claimed through a Company and although not confirmed as acceptable rates by HMRC there never appeared to be a problem with HMRC challenging these estimates.
In 2012 HMRC introduced a fixed rate, which is now £6 per week. This flat rate expense is published by HMRC as a fair approximation of the costs associated with using your home as an office and does not require receipts or further justification.
What if that doesn’t cut it?
If you are working from home for a significant amount of time and better yet, are carrying out ‘fee earning activities’, there is a possibility to claim an increased amount through your company.
We have not seen an increase in the amount of HMRC enquiries into use of home claims however it is worthwhile looking at a justification for claims in excess of £6 per week.
How do I justify the claim?
This is where it gets a little technical. The below formula is a good basis for calculating an apportioned charge for a use of home as office claim:
B + (D% x C) x E
A = The total number of rooms in the home
B = The number of rooms dedicated solely for business use
C = The number of rooms used partly for business and partly for personal use
D = The percentage of time spent for business use in comparison to personal use
E = The total home expenditures such as water and sewerage, rent, mortgage interest, heat and light, buildings insurance.
It is important to keep a note of the formula used.
What else do I need to consider?
A business using a substantial part of their property for business use may have implications on capital gains tax, business rates and principle private residence relief.