By Steve Blissett
We have updated our guidance on working from home for directors, sometimes referred to as rent non-vatable.
If you work from home, you can claim ‘home as office’ expenses. There is an HMRC allowance, however, you may be able to claim more with justification.
HMRC have a fixed allowance of £4 per week (£18 per month) which you can claim without any evidence of working at home. This allowance covers the extra cost of gas and electricity to heat and light your work area and towards work phone calls. An important distinction between what is work and what is personal needs to be made, as HMRC won’t allow you to claim back any expenses which you also use personally, such as telephone line rental and broadband.
Claiming more than the HMRC allowance
If you wish to make a claim which is higher than the £4 weekly allowance then you will need to keep records should HMRC ask for justification.
You will need to consider which room you use as an office. The room you use must have a dual purpose so that it isn’t used exclusively for work, e.g. other members of the family using the room to look at the internet, watch TV, etc. If you use it for nothing but work then there could be a Capital Gains tax implication. Additionally, you can only claim hours for actual work, which, in this case, is being defined as work you would perform at your normal place of work. If it were purely “admin” then HMRC may challenge this. HMRC may also challenge your claim if you work from home through choice rather than necessity.
If you can arrange for a dedicated home phone line to be in the company’s name, then great. If you then use it purely for business with only a tiny bit of personal use then it will all be allowable by HMRC, however, it may not be practical to have another line. In the latter case, our advice would be that you only claim a small proportion of the phone call costs as a business expense, however, HMRC could challenge this. This approach applies to mobile phone calls too.
Claiming more? Let’s look at an illustration. Here is a worked example:
- Home costs are £500 a month.
- The room containing the office is 20% of the floor area of your house.
- Therefore, this is worth £100.
- If you use the room to work for 25% of the time you can claim back £25 per month.
Please ask your Account Manager for our easy-to-use calculator.
Mortgage interest and rent
The rules are very complicated and they also differ between self-employment and employment (directors). Some advisors have interpreted the rules to “allow” mortgage interest and rent, whereas Rodliffe Accounting now takes a more prudent view. We do understand that there is an argument to include either of these costs in the calculation above, however, we would not recommend this.
- You can only claim for things to do with your work, e.g. business telephone calls or the extra cost of gas and electricity for your work area.
- You can’t claim for things that you use for both private and business use, e.g. rent or broadband access.
- You don’t need to provide records for claims of up to £4 per week (£18 per month). For claims over £4 per week, you’ll need to provide evidence of what you’ve spent.