As a Ltd Co director, how should I claim for use of a home office?

Ed,

If you would like a copy of a licence/rent agreement, please email me at expertise AT hrbs DOT biz and I would be pleased to provide a free copy.

Regards

Keith

Does this approach of renting premises incur Capital Gains Tax on any future sale of your home?

Hi Mike

No it doesn't because you are allowing the company non-exclusive use of part of your home. It is key that the agreement states that and you can evidence that the areas used for business have a domestic use eg storage of household items, mixed use eg kids use the area to do homework etc. If you only have very occasional visitors eg for board meetings, client entertaining then business rates won't apply.

Regards

Keith

Keith,

Thanks for this. I was considering recalculating the utility bills due to the recent increase in fuel prices, but some form of rental agreement might be a better idea.

If you don't mind, I'll drop you an email regarding the rent agreement?

Best Regards,

Mike

Hi there - has anyone got a minute of meeting template that I could use for my company? Would be great if you could email me one? gavin AT esslemont DOT ltd DOT uk.

Thanks!

If we take this approach, do we still need to categorize this expense as 'use of home', or would this then go down as office costs?

Don't forget HMRC does allow you to claim £3 a week no questions asked for use of home.

I don't own my home, I rent, so presumably if I wanted to take the rental approach I'd be subletting it to my company and this would I guess make things more complicated?

I figured as much, I'm happy to just take the £3 a week anyway. I can only really justify the extra electricity usage which the above roughly covers.

I've previously applied my work from home allowance to my director's loan, e.g. my loan goes down by £3 each week.

I can't figure out how to do this in FreeAgent, and I'd prefer to set it up as a recurring expense to save time. Can someone point me in the right direction?

Thanks,

Zach

I own my house so presumably, if I rent from myself, any rent paid by my ltd company to myself is classed as my personal income and would need to figure in my self assessment etc?

So would it be advisable to not do it this way as this attracts a higher rate of tax (income versus corporation tax)?

Hi Chris

"I own my house so presumably, if I rent from myself, any rent paid by my ltd company to myself is classed as my personal income and would need to figure in my self assessment etc?"

If you recharge only a proportion of costs ie no profit included in the rent, the rental income and costs on your tax return will be equal ie no personal tax due. However, the company would have received a tax deduction for the rent and you would have received a contribution towards your costs.

Keith.

Hi there,

I'm in a similar position to Chris with a limited company being ran from my house.

Are there any rules or guides as to how much I can charge the business to rent the home office space?

I was thinking, should it be a percentage of the mortgage and other bills (like electricity, gas, water, broadband, etc)? If so, I was thinking that my house has 8 rooms, and my business uses (on average) 1 of these, then an eighth of all these bills combined might be a way to work out the value, which might come to say, £200 per month.

Or should I just find out how much serviced offices are in my location and charge a similar amount?

Just wondering what to base this rent on in case I'm ever challenged as to how I came up with it. I want my reasoning to stand up and be acceptable.

Thanks,

Stephen

Hi Stephen

Whatever you charge has to be shown on your personal tax return in the property income section and you can only claim actual costs as a personal tax deduction against this rent. It is therefore common practice just to claim a reimbursement of costs incurred and so the profit would be NIL although the company would get a tax deduction at (currently) 21%.

Costs can be apportioned on a floor area basis if the room is a dedicated office (albeit with some personal storage so that it has a very small element of private use). If the room is not a dedicated office you will need to further apportion the costs.

HMRC examples are at http://hrbs.biz/id?401 . Although they are for self assessment purposes, they do act as a guide as to what you can reasonably claim as a cost in your tax return (and hence rent as you would be claiming a reimbursement of costs).

I have a license agreement available if you would like a copy. Please email home DOT office AT hrbs DOT biz and let me know if you want an agreement for sole owner, joint owner, sole tenant or joint tenant.

Regards

Keith
HRBS.biz

Hi

The home office license agreements are available for free download at http://hrbs.biz/id?317 (rar file) and http://hrbs.biz/id?318 (zip file) . Feel free to pass these links on.

Regards

Keith
HRBS.biz

Hi Keith,

Thanks for the advice and the link, and thanks for sharing the license agreements, it's much appreciated.

I noticed that it doesn't state the price for the rent. Does the price need to be written down on that document or anywhere else at all?

When taking the money for this rent from the business, is this done in FreeAgent like a normal Expense Claim? Under the expense category 'Use of Home'?

Finally, as the home owner, would I need to create an bill/invoice to the business for this amount each month? Or would the license be sufficient to cover this monthly outgoing from the business?

Thanks,

Stephen

Hi Stephen

Does the price need to be written down on that document or anywhere else at all?

The "rent" is reimbursement of costs incurred and so these will vary from quarter to quarter. In practice you can make an expense claim quarterly in arrears referring to copies of supporting documentation in case of HMRC enquiry. This would be in accordance with the licence agreement.

I would suggest the expense claim be along the lines of:
Home office costs for the quarter ended ...

mortgage interest (or rent) £x @ x% = £Y
council tax £x @ x% = £Y
water rates £x @ x% = £Y
insurance £x @ x% = £Y
cleaning £x @ x% = £Y
electricity £x @ x% = £Y (*)
gas £x @ x% = £Y (*)
broadband £x @ x% = £Y (*)

Occasional costs such as redecoration or repairs to the exterior of the house can also be claimed if paid personally, in the same standard ratio.

Costs such as electricity, gas and broadband may have a higher proportion as they are not strictly incurred on a floor area basis. The gas heating may only be on because you are at home for example. The business proportion of electricity may be higher to run your PC/Mac/servers etc.

Decoration of the room only and equipment used in the room for business can be paid direct by the company rather than claimed on expenses. It is standard that the tenant keeps the rented area clean, decorated and in general good order.

Hope this helps.

Keith
HRBS.biz

(I'll be adding an indepth guide and further examples soon at http://tips.hrbs.biz .)

Hi Keith,

Thanks for this, again, much appreciated.

I'll also check out your website for further tips.

Thanks,

Stephen

This is very useful information ... thanks!