Piggybank News

July 10, 2012

Tax relief from using your home as an office.

Many landlords and small businesses run from a home office but fail to claim business expenses for things like phone and broadband, energy bills, council tax, repairs and maintenance.  They may be worried about triggering a capital gains tax bill when they move house or that they will be asked to seek planning consent for using a domestic premises for commercial purposes.

However, HM Revenue & Customs guidance suggests that this is a perfectly valid expense to claim provided the rules are followed.  Claims of under £200 should not attract any questions at all but for claims above this level you may be asked to provide supporting evidence such as bills and receipts.

Rather than claiming for a specific room set aside for business we have been advised that it is best to work out the average number of hours each week that several rooms are used for business – maybe three hours a day for the spare bedroom as an office and a couple of hours for business meetings in the living room.  Work out what proportion of the week this is and what proportion of your property size is involved.  This will give you a percentage of your bills which can reasonably be claimed as business related expenditure. Put the total into your tax return as ‘Other expenses’ and deduct the amount from profits to cut the tax paid.

(Piggy says “Never forget to check your tax return with a properly qualified person to ensure that you are claiming any reliefs you are entitled to correctly.”)

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March 13, 2012

Change in Tax Rules for Holiday Lets

In a recent case, the tax tribunal dismissed HMRC‘s argument that furnished holiday lets should be categorised with other buy-to-let and rental properties, which attract 40% inheritance tax on the owner’s death.  Instead they ruled that it should be deemed a business. This means that owners of holiday homes who let them out will be able to claim business property relief and reduce their Inheritance Tax bills.

Stephen Barratt, private client director at accountants James Cowper, said  “While HMRC can be expected to take their arguments to the Upper Tier Tribunal, as it stands the decision is good news and could open the door to a flood of claimants who have been awaiting the verdict. It could also give people greater certainty in planning their affairs.”

This ruling is in contrast to the case for to buy-to-let properties which are not treated as businesses for tax purposes.

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