If you are a company director and you perform some or all your work from home you are able to make a legitimate claim for expenses to cover this cost.
Can the company just pay my bills for me, my phone bill and broadband bill is nearly all business anyway?
It’s not a great idea to simple get the company to pay your bills as this would create a taxable benefit in kind on yourself and would be reportable on a P11d and Class 1A NIC would be chargeable. The best thing to do in this scenario is for the company to supply a separate business line or internet connection. If the company contracts directly with the service provider then this will all be allowable for corporation tax and would not be a benefit in kind.
What about other household bills, power, electricity, cleaning?
Currently, HMRC allow you to claim a flat £4 per week fixed expense per director which can be claimed without the need for receipts.
Alternatively, you can claim the actual additional cost to your home services that are incurred by working from home.
HMRC do not allow you to claim for services which are already being provided for personal use – for example, if you already have a broadband connection, unless you can show that there is an additional cost to you of using it for business purposes then you cannot make a claim. For example, if you need to install a faster connection to be able to cope with the additional business usage, you could claim for the incremental value.
For electricity, if your office is isolated from the rest of the house you could install a separate meter to measure light and heat.
Alternatively you will need to establish a proportion of the household costs which are used by the business. You will need to work out the percentage of the property which is used for business and for how long. It is advisable when doing this to document the work done at home. Keep a diary to show what work or duties are performed at home. This type of evidence is often requested by HMRC to help support any claim that you have made.
Can I claim rent or mortgage interest or council tax?
As these costs would be incurred anyway, directors cannot claim a proportion of these expenses. If you have to rent a larger property to run the business from then you could consider charging the additional rent as an expense and the additional council tax.
Can I charge my company rent?
This may only be done under a formal license agreement which allows your business to occupy apart of your property.
You will be in receipt of rental income and will need to complete the property pages on your personal tax return and declare any profit after overheads and costs.
You need to be wary of complications ahead that may restrict your claim to Principal Private Property relief on a future sale of your home as part of your home would be rented out and considered a business.
You need also to be wary of local business rates and it is advisable to check with the Valuation Agency to check whether business rates are likely to be applied to your property.
If you would like any further information, please do not hesitate to get in touch.
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