| Once upon a time the only expenses that you could | | | | rate. The best way to do this is to either pay for a |
| claim when using part of your home as an office were | | | | commercial valuation or to keep a record of the rents |
| the additional costs incurred. This meant that HMRC | | | | charged for serviced offices in your area and apply |
| would not allow any part of your standing charges to | | | | the same cost per square metre to the area you use |
| be claimed as they argued that you would incur these | | | | as an office. |
| whether or not you used your home for business. | | | | * HMRC would expect to see a proper rental |
| This changed with the introduction of S.34 ITTOIA in | | | | agreement between you and your limited company |
| 2005 which allows you to claim a reasonable | | | | and this would be best drawn up by a commercial |
| proportion of an expense incurred for business | | | | lawyer. |
| purposes provided that it is identifiable. Therefore, if | | | | * You must ensure that you do not use the room |
| you keep a log of all of your telephone calls and are | | | | exclusively for business purposes and that any rental |
| able to show those that are business calls, you will be | | | | agreement does not insist on exclusive business use |
| able to claim that percentage of all of your telephone | | | | or you will risk losing Principle Private Residence relief |
| calls including rental charges. However, you would not, | | | | on that part of the house. This would mean paying |
| for example, be able to claim a percentage of your | | | | Capital Gains Tax on that part of your house when |
| clothing costs as you would not be able to | | | | you sold it. The rental agreement should therefore |
| demonstrate which proportion of your business suit | | | | state that the company can only use the facilities |
| you wore for business purposes and which proportion | | | | during designated hours, say 9 to 5 Monday to Friday. |
| for warmth and public decency. The point to | | | | * You can then deduct the relevant proportion of all |
| remember is that you can claim where the proportion | | | | costs including mortgage, rates, insurance and other |
| is identifiable, not simply where it is just or reasonable. | | | | utility costs from the rent received and only the |
| Please note that where you have a mobile telephone | | | | balance, if any, would be taxable on you. |
| and the contract is in the name of your company, you | | | | * As rent is not subject to national insurance, the |
| can claim 100% of the cost. | | | | company does not need to account for either |
| This still means that for some expenses such as heat | | | | Employer's or Employee's national insurance |
| & light etc. that the identifiable amount is very | | | | contributions. |
| small because you would have to apportion your costs | | | | * If you have brought forward losses in respect of a |
| based on the area of your home used for business | | | | buy to let portfolio, those losses can be offset against |
| purposes. To make this a little easier HMRC have | | | | any rents received from the company. |
| agreed that anyone using their home for business | | | | * Please be aware that if the guidelines above are not |
| purposes can claim £3 per week without fear of | | | | followed and HMRC can show that the rent being paid |
| enquiry. The amount is clearly very small but should be | | | | is not at a market rate or there is not a formal rental |
| claimed by every business where relevant. | | | | agreement, HMRC can treat the rents paid as |
| Charging your Limited Company rent. | | | | additional salary and apply both tax and national |
| It is also possible for persons working through a limited | | | | insurance. |
| company to charge their company rent for using a | | | | * Please also bear in mind that if you are in the |
| room as an office. This has proved quite popular for | | | | enviable position of not having any mortgage then any |
| some businesses but there are a number of issues | | | | rent received by you will be taxable, perhaps at 40%. |
| that need to be taken into account in order to ensure | | | | Therefore if you are in this position and do not have |
| that this is not successfully challenged by HMRC. | | | | any buy to let losses to utilise then you must consider |
| * You need to be able to demonstrate that the | | | | whether this option is for you and we will be happy to |
| amount you are charging your company is a market | | | | advise. |