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Business expense

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brightncheerful
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Business expense

#13272

Postby brightncheerful » December 8th, 2016, 11:23 am

I treat 50% of our gas and electricity bills as business expenditure. (Have done for years, never questioned by HMRC so no need for anyone here to do so!)

I'm wondering whether I could also charge as a business expense the same or sightly lower percentage of the cost of gas central heating boiler maintenance and servicing?

Any thoughts?

supremetwo
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Re: Business expense

#13284

Postby supremetwo » December 8th, 2016, 11:43 am

https://www.gov.uk/expenses-if-youre-se ... e-property
Business premises
You can’t claim expenses or allowances for buying building premises.

Claim expenses for repairs and maintenance of business premises and equipment.

rgifford
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Re: Business expense

#13510

Postby rgifford » December 8th, 2016, 10:33 pm

brightncheerful wrote:I treat 50% of our gas and electricity bills as business expenditure. (Have done for years, never questioned by HMRC so no need for anyone here to do so!)

I'm wondering whether I could also charge as a business expense the same or sightly lower percentage of the cost of gas central heating boiler maintenance and servicing?

Any thoughts?


I assume that you are claiming use of home expenses rather than a business premises.

HMRC have a £4 a week no questions asked allowance and a claim of more than that needs to show that the additional cost caused by the business use is more than that. You don't have to actually show that, you just need to be able to show it if asked. 50% of the total cost appears high but I assume that you can justify that.

For annual servicing there is no additional cost so I feel that you can't claim any part of it.

brightncheerful
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Re: Business expense

#14487

Postby brightncheerful » December 12th, 2016, 6:13 pm

Whether it's a business expense is the first question. Assuming it is, how an expense of the business is treated falls into one of two categories: whether a repair or an improvement.

An improvement to my central heating system would come under capital allowance. a repair which does not improve the system is a expense.

Via the link above, thank you, I have read the more detailed information and it would appear that the cost of maintenance would qualify as a business expense. I have two separate percentages for home/office. (1) 50% for electricity and gas; (2) a lower percentage based on the ratio of business to personal floor area calculated by reference to the GIA of the property.

I shall ask my accountant but I think that the lower percentage for the cost of maintenance would apply. Having just replaced the light bulbs in my office with LED, in place of halogen, that is an improvement so would qualify for capital allowance. The cost of having the work done would also be chargeable.

( i should think the £4 a week no questions asked allowance is for home-workers, otherwise employed?. In any event, that doesn't apply in my case: I have two rooms both used exclusively for business purposes. All directly related expenditure or indirectly (shared) qualifies as a business expense.

PinkDalek
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Re: Business expense

#14506

Postby PinkDalek » December 12th, 2016, 7:12 pm

brightncheerful wrote:An improvement to my central heating system would come under capital allowance. a repair which does not improve the system is a expense.


On the first part, doesn't it depend on the nature of the improvement? If "merely" new technology see BIM46925 https://www.gov.uk/hmrc-internal-manual ... l/bim46925 (and the examples in the Draft which failed to make it to BIM46925 https://www.gov.uk/government/uploads/s ... epairs.pdf)

Having just replaced the light bulbs in my office with LED, in place of halogen, that is an improvement so would qualify for capital allowance.


Most would claim such expenditure as revenue.

rgifford
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Re: Business expense

#14531

Postby rgifford » December 12th, 2016, 8:49 pm

brightncheerful wrote:( i should think the £4 a week no questions asked allowance is for home-workers, otherwise employed?. In any event, that doesn't apply in my case: I have two rooms both used exclusively for business purposes. All directly related expenditure or indirectly (shared) qualifies as a business expense.


It is for employees who work at home. There isn't a number of hours worked requirement. It applies to the single employee of a PSC Ltd company as well as larger companies and I would expect similar HMRC allowances for other business models.

https://www.gov.uk/tax-relief-for-emplo ... ng-at-home

I remember my accountant warning about the difficulty of getting HMRC to agree on which home expenses are caused by the business, risk of part of my home being liable to business rates (however small that risk may be but regarding part of it as purely business premises is a risk), CGT for sale of a business premises and so on. The amount of tax saved by loading the home use costs wasn't worth that risk in my case. There is the additional risk of course that if HMRC find anything which is pushing the boundaries when carrying out a spot inspection, that they may look harder than they otherwise would for anything else. There aren't necessarily any skeletons for them to find of course but the effort of them looking is something I felt I could do without.

Your case could well be very different to mine, and probably is if you have the blessing of your accountant.

brightncheerful
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Re: Business expense

#15331

Postby brightncheerful » December 15th, 2016, 1:25 pm

Most would claim such expenditure as revenue.

Only because the sums involved don't amount to much. Probably I claim claim such as revenue as revenue. I posted because strictly replacing halogen with LED is an improvement, not a repair.

brightncheerful
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Re: Business expense

#15332

Postby brightncheerful » December 15th, 2016, 1:30 pm

There is the additional risk of course that if HMRC find anything which is pushing the boundaries when carrying out a spot inspection, that they may look harder than they otherwise would for anything else.


Having had an inspection (not a visit), HMRC queried an invoice from Homebase for furniture (book case shelving). I told my accountant to tell the inspector that surely the inspector wouldn't seriously think I'd buy furniture from Homebase for my home. I offered to photograph the shelving and what it is being used for. The query was dropped.

PinkDalek
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Re: Business expense

#15334

Postby PinkDalek » December 15th, 2016, 1:39 pm

brightncheerful wrote:Only because the sums involved don't amount to much. Probably I claim claim such as revenue as revenue. I posted because strictly replacing halogen with LED is an improvement, not a repair.


I was effectively querying if there was an improvement or not. I'm not an expert on LEDs v Halogen but is this relevant?:

"As technology changes over time, something that would be accepted as an improvement in year one may by year five be simply a repair. This is because that technology is no longer seen as an improvement and is simply what is used for the job; it has become the industry standard for that type of work."

From the link previously provided https://www.gov.uk/hmrc-internal-manual ... l/bim46925

See also "Refitting a kitchen" https://www.gov.uk/hmrc-internal-manual ... l/bim46911

Extract:

"The boiler in one property needs replacing. As the new boiler has to be located in a different position, Sophia decides to modernise the kitchen as a whole.

All the existing base units, wall units and sink etc, are stripped out and replaced, as is the fitted cooker and hob. New units of an equivalent quality are installed but in a different layout to allow for the re-location of the boiler, finally the kitchen is re-plastered and re-tiled.

The entirety is the house, not the fitted kitchen. The new kitchen is slightly different but it does the same job as before. Sophia has simply replaced the old kitchen with a modern equivalent. This is a repair and allowable expenditure.
"

UncleEbenezer
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Re: Business expense

#15615

Postby UncleEbenezer » December 16th, 2016, 9:26 am

For many years I've worked exclusively from home. No office since around the turn of the century. The majority of the time has been working for myself (sometimes struggling, sometimes doing OK), but I also spent some of the time in PAYE employment for an employer on a different continent.

Once upon a time I used to claim a modest portion of the rent and bills as a business expense. Not least when I upgraded to a two-bed flat so I could use the main bedroom as office and have a living room for living in, and thought the difference between the rent on a two-bed vs a one-bed flat looked like a legitimate expense.

Nowadays I claim only the £4/week. That's on the advice of my financial controller, who tells me the kind of thought process described above no longer works: presumably HMRC saw it being abused too often. The rationale being, we might get away with it, but the risk of getting into a dispute with HMRC wasn't worth it even if we won in the end.

richlist
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Re: Business expense

#19600

Postby richlist » January 2nd, 2017, 9:51 pm

My understanding is that there are a number of different ways of arriving at a figure for the use of your home as an office. The method I use is to add up the total running cost of the home......insurance, utilities, repairs, maintenance etc and divide by the number of rooms in the home from which you could work i.e. lounge, dining room, study, bedrooms etc.

melonfool
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Re: Business expense

#20746

Postby melonfool » January 6th, 2017, 4:27 pm

richlist wrote:My understanding is that there are a number of different ways of arriving at a figure for the use of your home as an office. The method I use is to add up the total running cost of the home......insurance, utilities, repairs, maintenance etc and divide by the number of rooms in the home from which you could work i.e. lounge, dining room, study, bedrooms etc.


And then what?

So, say it costs £200pm to run our house. I can work in the study, kitchen or lounge (I suppose I could work in the bedroom but I wouldn't, nor the loo).

So, £200/3 = £66. What do I do with that figure?

Mel

IsleofWightPete
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Re: Business expense

#20800

Postby IsleofWightPete » January 6th, 2017, 10:04 pm

melonfool wrote:
richlist wrote:The method I use is to add up the total running cost of the home......insurance, utilities, repairs, maintenance etc and divide by the number of rooms in the home from which you could work i.e. lounge, dining room, study, bedrooms etc.


And then what?

So, say it costs £200pm to run our house. I can work in the study, kitchen or lounge (I suppose I could work in the bedroom but I wouldn't, nor the loo).

So, £200/3 = £66. What do I do with that figure?

Mel


I would disagree that it is the number of rooms where you COULD work - I think it is the number of rooms where you DO work, multiplied by the percentage of time those rooms are used for work rather than domestic.
I use that method for my home office, and attribute 90% to work use (not a good idea to have 100% business use, as that can affect private residence relief in regard to CGT). I calculate the office % of total house based on sq ft.

As to what you do with that figure, the cost is an allowable business expense, just as phone or stationery expenses or whatever would be allowable expenses.

melonfool
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Re: Business expense

#20807

Postby melonfool » January 6th, 2017, 10:58 pm

IsleofWightPete wrote:
melonfool wrote:
richlist wrote:The method I use is to add up the total running cost of the home......insurance, utilities, repairs, maintenance etc and divide by the number of rooms in the home from which you could work i.e. lounge, dining room, study, bedrooms etc.


And then what?

So, say it costs £200pm to run our house. I can work in the study, kitchen or lounge (I suppose I could work in the bedroom but I wouldn't, nor the loo).

So, £200/3 = £66. What do I do with that figure?

Mel


I would disagree that it is the number of rooms where you COULD work - I think it is the number of rooms where you DO work, multiplied by the percentage of time those rooms are used for work rather than domestic.
I use that method for my home office, and attribute 90% to work use (not a good idea to have 100% business use, as that can affect private residence relief in regard to CGT). I calculate the office % of total house based on sq ft.

As to what you do with that figure, the cost is an allowable business expense, just as phone or stationery expenses or whatever would be allowable expenses.


Well, I disagree with the whole premise put forward by Richlist, which is why I was asking him to explain it more fully - before I explained why I disagreed. But I think you should divide the costs by the number of rooms in the house (all of them) and then attribute a % of the room you do work in - so if there are ten rooms, of which the study/office is one, then you have £20 per room. Then take that £20 and apply the % time you actually do use it - as you say, 90%. Then *that* is your figure. Not some random figure based on some random rooms you might use, if you felt like it, one day.


Mel

dspp
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Re: Business expense

#20932

Postby dspp » January 7th, 2017, 2:58 pm

I take the running costs of the house (elec+gas+water+clean, but not rates) and divide it by the number of adults in residence +1. The +1 represents my use in the working daytime as distinct to all residential use. In my case it is 1/4. So far HMRC have not objected.
regards, dspp

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Re: Business expense

#239038

Postby Cookie » July 24th, 2019, 9:45 pm

Why risk an inspection over trivial amounts (lightbulbs! Jeeze!)


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