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Most businesses in the UK are small which means that a lot of business owners work from home on a full time basis or will at the very least carry out some admin tasks from home such as raising invoices or emailing customers.

There is no set rule on how you should claim for ‘use of home as an office’ but there are three common methods that most businesses use.

Use HMRC’s suggested flat rate allowances that came into effect from 6th April 2013. This method is very simple and HMRC have given fixed rates based on the amount of hours that you work from home each month. These rates are:

 

Hours working from home per month

Amount to claim each month

25-50

£10

51-100

£18

101 plus

£26

 

If your claim is fairly small then it is perfectly adequate to make a reasonable estimation. We do this on behalf of our clients when calculations are not provided to us as part of the records. Estimations are based on a number of factors such as  how big the home office is, what type of equipment is used, what type of business it is (and therefore how long would be spent working from home). So for example, if we had a client who has an e-commerce website which he/she runs from home then we would estimate a higher allowance over a consultant who spends most of their time on the road and only completes small admin tasks from home.

As long as a fair amount is claimed that can be justified then HMRC will rarely dispute it.

This method is beneficial because it is quick and easy and does not involve extensive calculations. However the amounts are fairly low so it may work out better for a business to look at the other two methods.

This involves calculating the total costs of the home and apportioning that amount by the floor area that the home office takes up, in relation to the house as a whole. So for example, if your home office is 10% of the total floor space and the total home costs amounted to £8,000, then your claim would be £800.

Costs that can be taken into consideration are; energy bills, telephone, broadband, mortgage interest/rent, council tax, repairs (with restrictions) and water. If the home office is also used domestically then the claim should be reduced accordingly.

This method can be quite time consuming to calculate but it has the potential to result in a sizable claim for use of home as office.

If you own your home and use it ‘wholly and exclusively’ for business then there may be a potential capital gains liability if you were to sell. This is something you should consult your accountant about, as it may be worth considering using the room partly for domestic purposes to avoid this potential liability. 

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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