Use of home as office

Many small businesses are based at home. If you work from home it is possible to claim a reasonable amount for using a room or rooms at home for business purposes. Costs might include part of the bills for heating, light, water, and mortgage interest.

If you are doing this on a small scale and don’t have all the expense receipts to arrive at an exact figure, it is usually acceptable to claim a modest flat weekly amount provided this is reasonable. You could base it on a sample costs for one month or quarter perhaps.

 If the home is used for only a few hours a week (e.g. by a builder who does his paperwork at the weekends) then a reasonable claim might be perhaps something between £2 and £5 – per week (i.e. between £96 – £240 per annum, for working 48 weeks a year).

If the claim is going to be higher than this then it is important to keep original bills or evidence of amounts paid and the basis on which the proportion has been calculated.

HMRC has set out their view on what can be claimed for use of home as an office in the on-line Business Income Manual at http://www.hmrc.gov.uk/manuals/bimmanual/BIM47800.htm

 It is particularly useful to look at their examples given at  http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm 

 There are no hard and fast rules. What is ‘reasonable’ is influenced by 

• The size of your ‘office’ in relation to the whole property
• The length of time you spend working from home
• The sort of equipment you use – are you likely to have ‘above average’ power consumption?
• Whether you occupy a room exclusively for business or use a room for business and domestic purposes
• The number of other people living in the property might affect the proportion of private use

 Note:  If you use a room in a home you own, ‘exclusively’ for work, this could reduce the Capital Gains Tax private residence exemption when the property is sold.  This is because any part of the property exclusively used for business will not qualify for Capital Gains Tax private residence relief. This problem may be avoided by ensuring there is some domestic use of the study (e.g. keeping a second TV in the study, and using it from time to time for personal enjoyment).