Newsletter Spring 2006

Spring 2006 Newsletter

Content

U-Turns Galore

Premises, Promises

Filing Bonus

RIP: 0% Rate

His and Hers

Party Spirit

State Of The Union

VAT's The Point?

Going Dutch

Away Win For Revenue

WIP-Round

The Best Land Plans

Tax Free Gizmos

Where Theres A Will

Do You Work Here?

Out Of The Shadows

Sacrifice Works

Home Sweet Office

Sauce For The Goose

Blissful Ignorance

PC Or Not PC?

Lost On Penalties

Worth The Paper

Carry The Can

Home Sweet Office

The Inland Revenue have always had a sceptical view about employees who want to claim a tax deduction for household expenses because they work from home, but it seems they are even tightening up their practice further. They won't allow you anything unless:

what you do at home are important duties, not just preparation or incidental work;

you can't do them without particular facilities or equipment;

those facilities are not available on the employer's premises (or the nature of the job requires the employee to live so far from those premises that the worker can't be there on a daily basis);

the employee has never been able to choose between working at the employer's premises or elsewhere.

If you satisfy all those conditions, they will allow a deduction only for the extra costs of working at home - nothing for council tax, rent, insurance, water rates or mortgage interest, because they reckon you would be paying these anyway. It's only what can be metered and shown to be extra - gas, electricity and possibly water - and that's it. They will very generously allow you to deduct £2 a week without proving it - in line with the £2 a week exemption available if your employer pays you something towards these home-working costs. If you want more than £2 a week, you have to have the evidence.

There is an alternative: you could rent some of the property to your employer and then use it as an office - turning some of your salary into rent. The expenses that you can deduct from rental income are more generous than those you can deduct from employment income. You have to be careful with a number of other possible problems, including insurance, perhaps your mortgage lender, even business rates. It may be more appropriate for the proprietor of a very small company than an employee of a larger one. But if you think it's worth looking at, we can advise you.