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Expenses and methods of apportionment

The part of your home designated for business must be used solely for that purpose during that set time. For example, if you used a room as an office, it must be used exclusively for business purposes in order to claim a deduction. It would be difficult to claim a deduction if the kitchen table was used as an office desk as a kitchen is unlikely to be exclusively for business purposes.

Generally expenses fall into two categories, fixed costs and running costs. Fixed costs are items that relate to the whole of the house and have to be paid whether or not there is business use. You may claim some of these costs, if part of your home is used solely for business over a certain period of time, under the apportioning methods mentioned below. Running costs vary with the amount of business use. It is therefore appropriate to apportion these expenses by the usage method mentioned below.

HM Revenue & Customs have suggested the following methods of apportionment but will also consider underlying facts:

• Time basis
• Area
• Usage

Operating through a company?

You may make the same claims for use of home if you are trading through a company, provided there is a formal rental agreement in place. It would be necessary to charge a commercial level of rent. You would be assessed on the rent received, net of the use of home as office costs and the company would be able to deduct the rent paid as an expense in the accounts. If rent is paid without an agreement, HM Revenue & Customs may treat the rents paid as salary and you would not be able to claim relief on the household expenses.

There can be adverse effects of making a claim for use of home as office.

The Morley and Scott team of tax specialists are always on hand to offer guideance and effective tax saving strategies to ensure the correct level of taxes are paid.

To find out how we help businesses visit www.morleyandscott.co.uk