Use of home office seeks to compensate the director for any additional costs of working and running a small business from home. This calculation is then based on the fact that you use the room on a ‘non exclusive basis’ otherwise you end up with Capital Gains tax issues which would cause a major head ache in years to come, hence we are trying to protect you from this and provide the best advice possible.
Definition of non exclusive –
24 hours equals a full day and if you believe that you spend 10% of the time operating the business then that would equal 2.4 hours every day, for example
Definition of useable rooms –
Lounge; dining room; bedrooms; study
You would then define the use of ONE of these rooms
Worked example (hypothetical) –
Total costs for running the home £1,000 per month (including all bills and mortgage interest only)
3 useable rooms (1 bedroom/ 1 lounge and dining room)
10% of the day worked from home 7 days a week
Amount claimed in this example would be £1,000 / 3 rooms x 10% = £33.33 per month or £400 per year
Minimum and maximum sensible amounts to claim:
Minimum – HMRC have a fixed allowance that they will allow you to claim £4 per week without any evidence of working at home as an office therefore £208 per year is an amount that you can claim without any issues.
Maximum – the maximum we suggest you claim should be based on the attached. We suggest you complete this and keep on file to support your claim. Please liase with your Accountant if this amount needs to be changed in your online accounts because it is a recurring amount.
Tip – complete and file the agreement attached to show HMRC should they ever ask.